Peptech upbeat despite half year loss

Australian biotechnology company Peptech posted a net loss of $4.6 million on Wednesday for the half-year ended March 31, 2002, but said that the progress of key patents in the US would guarantee meaningful new revenue streams going forward.

The result was based on revenues of $3.5 million, a 90 per cent drop on the previous half-year period during which Peptech booked a number of 'milestone' transactions leading to a profit of $26 million.

Included in the March 31 result was a $1.0 million foreign exchange loss, a prior period tax calculation adjustment of $1.6 million and expenses of $1.7 million in relation to the company's Domantis (formerly Diversys) research collaboration payments.

"It is difficult to compare this half-year with that of the corresponding prior half-year, since we have not received any milestone payments and have been disadvantaged by a foreign exchange loss," Peptech managing director Stephen Kwik said.

However, he affirmed that the company was moving gradually towards the final receipt of potentially lucrative patents from the US Patents Office relating to its discoveries and techniques for the use of antibodies and/or antibody fragments that bind to TNF.

These techniques have proved successful in treating diseases such as rheumatoid arthritis and Crohn's disease and are used in the manufacture of the high-selling drugs Remicade and D2E7, produced by pharmaceutical giants Johnson & Johnson and Abbott Laboratories respectively.

Remicade was recently named by US analysts as the fastest-growing drug in the US market.

"I think the revenues from the US will be a very significant factor," Kwik said.

Kwik said that following the receipt of official allowance documentation from the Patents Office earlier this month, royalties arising from the patent decision could start to appear in three to four months. But while he admitted that he did not expect to see them on the books for the coming half-year he said the company's cash reserves of $22.1 million would keep the ship steady.

Also expected to provide important ongoing support, Peptech's veterinary division posted a robust half-year result spearheaded by a $1.1 million improvement in sales for the company's Ovuplant product, designed to induce ovulation in mares.

But, reflecting the general tone of uncertainty with regard to the Australian biotech sector, analysts warned that investors would continue to be preoccupied with the timing of the royalty payments.

"There is still a little uncertainty with regard to the royalty streams, and until that is resolved, given the overall sentiment in the sector at the moment that will continue to weigh on investors' minds," said Scott Power, health and biotechnology analyst with ABN Amro Morgans.

Peptech currently has TNF patents in Australia, Canada, six European countries including the UK and Germany with an application to the Japanese patent office under examination.

Peptech shares closed down 3.5 per cent to $2.76 on Wednesday.