By Mark Lawson

BioWorld International Correspondent

SYDNEY, Australia ¿ The newly merged GlaxoSmithKline plc has pulled out of a project to develop a second-generation influenza product being run jointly with Melbourne-based Biota Holdings Ltd., following disappointing sales from flu product Relenza.

Biota said Glaxo would withdraw from the project, after two years of collaborative effort, and surrender all the intellectual property rights for no payment. But Biota also said it would continue with the project and seek other partners.

The decision by Glaxo, which the pharmaceutical giant says is the result of a strategic review of its projects following the merger, caused Biota¿s share price to fall sharply on the Australian exchange.

By the close of business Friday the share price had fallen A9 cents to A$0.50 since the announcement. But last week¿s fall in share price was the latest in a long series of falls in Biota¿s stock since troubles with Relenza became apparent. The share price hit a peak of A$5 in November.

Sales of Relenza, which uses Biota¿s neuraminidase-inhibiting technology, has not met the expectations of stock market analysts, in part thanks to a poor flu season of the last Northern winter as well as strong competition from other products. Biota has made some additional revenue by selling a flu diagnostic kit that uses the same technology, but Glaxo executives have publicly described Relenza itself as a ¿niche product.¿

Last week¿s announcement from Biota stated that scientists from both Biota and Glaxo have been working on a second-generation anti-flu product for two years.

Biota Managing Director Hugh Niall declined to give any details of the technology involved, but noted that it involved making the neuraminidase inhibitors considerably more effective. Instead of one treatment a day, a second-generation treatment would require only one treatment a week.

He told BioWorld International that he was ¿not disappointed¿ at the withdrawal of Glaxo and that the withdrawal had occurred after the merged group undertook a review of its research portfolio. The company had made a ¿strategic long-term decision¿ to allocate resources into areas other than antiviral influenza treatments.

Glaxo researchers had made considerable contributions to the project, which was close to selecting a lead compound for clinical trials. As part of the return, Glaxo would complete a number of studies and continue to work on the project until the end of the year, he said.

The decision to withdraw from the project does not affect Glaxo¿s handling of the Relenza product, the technology for which is licensed from Biota.

Glaxo Chief Executive Jean-Pierre Gamier said, ¿We value our relationship with Biota and our marketing plans for use of Relenza this coming flu season are well under way. The second-generation product, whilst it is promising, now no longer fits with our strategy, as we have immediate needs to resource other programs.¿

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