Peptech confident in J&J royalty dispute

Peptech (ASX:PTD) is confident of coming out on top in its dispute with Centocor and its parent company Johnson & Johnson, the company said today after announcing the initiation of formal arbitration proceedings against the US firms.

The companies have been at odds over Peptech's anti-tumour necrosis factor (TNF) antibody patents since last September, when Centocor announced that it believed its US$1.25 billion arthritis drug Remicade was not infringing Peptech's patents, and stopped paying royalties in the US and Europe.

Peptech chairman Mel Bridges said the move to arbitration was mandated by the original agreement signed with Centocor, which required disputes to be settled by arbitration, rather than in court. He noted that arbitration was faster and less expensive than court proceedings.

Bridges said that while Peptech had spent longer than financial markets had expected in getting its case ready for arbitration, it was necessary to carefully and completely prepare the case, as each side only got one chance to present its arguments. The company has enlisted the support of key expert witnesses to support its claims.

"We have spent a lot of time putting together a strong scientific and legal case in support of Peptech's patents," Bridges said. "The board wanted every rock picked over before presenting its case."

The company expects the arbitration process to be resolved by mid-2004, based on historical expectations of similar proceedings, and the outcome of the arbitration would likely be binding, with no further recourse to the courts, he said.

A resolution in favour of Peptech would results in back-payment of royalties owed in addition to continuation of payments through the remaining life of the patents -- at least another seven years, according to Bridges.

While the dispute did not necessarily affect other agreements made by Peptech over its anti-TNF patents, he said a positive outcome would strengthen the company's position.

Last month, Peptech was cheered by the news that it would earn milestone payments as a result of approval granted to Abbott Laboratories to market rheumatoid arthritis drug Humira in Europe.

Humira targets the TNF protein linked to inflammation, and Peptech's anti-tumour necrosis factor (TNF) intellectual property is non-exclusively licensed to Abbott.

At press time, Peptech shares were trading slightly lower at AUD$1.95, on a volume of more than 700,000 shares.