BioWorld International Correspondent

LONDON - After cashing in on what could be considered one of the most astute investments in the history of biotechnology, Peptech Ltd. outlined its plans for spending the £71.3 million (US$139 million) it made from the sale of its stake in the domain antibody (dAb) company Domantis Ltd. to GlaxoSmithKline plc.

John Chiplin, CEO, said the deal represents "the best of both worlds," with Peptech maintaining access to the dAb technology that London-based GSK paid £230 million to acquire, while de-risking the technology and providing the company with the means to move its lead dAb into the clinic and develop other aspects of the portfolio.

"This is about creating long-term, sustainable shareholder value," Chiplin said in a teleconference. He claimed Domantis' £230 million price tag represented one of the highest valuations seen for a preclinical-stage portfolio. Certainly, Peptech's £71.3 million share is a handsome return for the £16 million it had invested.

And the news gets even better: Niall Henderson, chief financial officer of Peptech, said that as the UK subsidiary of an Australian parent, Peptech Ltd. is not liable to pay any capital gains tax in either jurisdiction.

In addition, Peptech owns the lead dAb product, which is due to enter clinical trials in 2007. GSK intends to maintain Domantis' research engine at the existing base in Cambridge, UK, and Chiplin said all the terms of Peptech's collaboration will be maintained going forward. That includes rights to two other targets for which Peptech could require GSK to develop dAbs.

The roots of the deal between GSK and Domantis go back to August, when they began to discuss a collaboration. Chiplin said negotiations were going well, but midway through Domantis received an unsolicited bid from a third party, prompting GSK to make a counter-bid.

"The nine-man board of Domantis, including the scientific founders and the VC investors, were all in agreement [about the sale]," Chiplin said. "It was a difficult decision, but they were unanimous at the end."

The huge price tag GSK put on Domantis is a significant endorsement of antibodies in general, Chiplin said. "That bodes well for Peptech going forward. In 2006, antibodies have been a hot space. To be a player you no longer need to be in small molecules."

Sydney-based Peptech, which is adding a listing on the Alterative Investment Market in London to its listing on the Australian Stock Exchange, also is on the acquisition trail. Last week it bought the antibody assets of Scancell Ltd., of Nottingham, UK, paying an initial £2 million, with another payment of £2.85 million due if any of the acquired products reach Phase I.

For that, Peptech picked up two preclinical stage antibodies, SC101 and SC104, which both target colorectal cancer, along with a suite of other antibodies in early development.

Lindy Durrant, scientific founder of Scancell, said the deal enhanced the prospects of the antibodies reaching the clinic, and that will allow Scancell to concentrate on developing its ImmunoBody cancer vaccine program.

Chiplin has ambitions to make further acquisitions. "One year ago, [Peptech] had one compound in the clinic. Now the pipeline is significant," he said.