BioWorld International Correspondent
SYDNEY, Australia - Peptech Ltd. set its sights on becoming Australia's second biotech company after settling a patent dispute with a subsidiary of Johnson & Johnson.
The settlement details remain confidential but are understood to be substantially less than the originally agreed upon deal that went to arbitration. However, profit projections for the company released last week indicate that it still could expect about A$30 million (US$23.1 million) a year while Johnson & Johnson, of New Brunswick, N.J., continues to sell Remicade, approved for anti-inflammatory diseases such as rheumatoid arthritis.
That sort of cash flow would put Peptech, of Melbourne, in the front rank of the Australian biotech companies, which generally are small.
Peptech's executive chairman, Mel Bridges, said that the company intends to be No. 2 among the Australian biotechs behind CSL (a company involved in blood products as well as biotech research), and certainly will look at acquisitions, as well as fund substantial research in its own right.
He said that he aims to build up the company to a market cap of A$1 billion in five to seven years.
The company's stock moved up from A$1.67 early last week to A$2 by Friday's close.
Peptech holds tumor necrosis factor antibody patents on the technology behind Remicade. It also previously had a royalty agreement with J&J subsidiary Centocor Inc., of Malvern, Pa., but in late 2002 J&J said the agreement was no longer valid and stopped paying royalties. The original agreement allowed for the dispute to go to arbitration, rather than to court, but the parties decided to settle before the conclusion of the arbitration process.
Peptech's profit projection released shortly after the announcement of the dispute resolution estimated that the company expects a net profit after tax for the year to Sept. 30, 2005, to be in the range of A$18 million to A$21 million. The estimates include revenue streams from both Centocor and Abbott Laboratories, of Abbott Park, Ill., with which Peptech settled a license dispute in November 2003. (See BioWorld International, Nov. 26, 2003.)
But the result for the financial year ended Sept. 30 was a net profit of A$28.3 million, with that figure helped by what is understood to be a lump-sum payment from Abbott.
To Centocor the deal might also include a lump-sum payment.
Alison Coutts, research manager of investment bank EG Capital, said she estimates that Peptech will have negotiated to get about 40 percent of what it would have received under the original agreement. That may work out to royalties in the region of 0.5 percent of sales.
Bridges said he is pleased to conclude a settlement with Centocor.
"Our license arrangements with Centocor and Abbott Laboratories are nonexclusive and pertain only to particular discoveries within our TNF patent portfolio. This allows us to further exploit these patents," he said.