BioWorld International Correspondent

SYDNEY, Australia - The small Sydney-based biotech company Peptech Ltd. is set to receive up to A$55 million (US$31 million) a year for several years in addition to another potential A$43 million, all through having the right patents in place.

Peptech told the Australian stock market last week that it had signed agreements with the German company Knoll AG, a part of pharmaceutical giant BASF, and with Centocor Inc., a subsidiary of Johnson & Johnson.

The two agreements require Knoll and Centocor to collectively pay up to A$40 million to A$55 million a year to Peptech, plus another A$38 million to A$43 million in up-front and milestone payments.

The exact size and timing of the payments due to Peptech depend on the success of the two products being developed by Knoll and Centocor. However, Peptech is counting on receiving significant payment since Centocor already has achieved registration of an anti-tumor necrosis factor treatment for rheumatoid arthritis, known as Remicade, and Knoll is now "pursuing registration" of two more anti-TNF products.

In the stock exchange announcement, Peptech Managing Director Stephen Kwik said, "We expect that substantial funds will be realized from these newly signed agreements. No longer can it be said, therefore, that Peptech's anti-TNF patents are mere concepts and no longer will Peptech be regarded as a speculative stock, as it will have substantial cash resources with sound sources of annual revenues."

The company has gained this windfall without either Knoll or Centocor using its expertise.

Peptech's chief financial officer, Dawn Mills, said that both Knoll and Centocor had done their research independently and were not using Peptech expertise. The payments were being made to avoid violating the company patents for the expertise.

"They [gained the technology] independently but we got there first," Mills said.

Mills also said the size of the royalty payments quoted by Peptech in the announcement are based on the sales that the two companies expect to make from their products, with both products expected to be on the market by 2002.

Peptech did the original work on anti-TNF factors, which can be used to treat inflammatory diseases, more than 10 years ago. It did no further commercial work in the area but maintained the patents. The company is best known for work on implants for controlling fertility in animals.

The news of the agreement with Knoll and Centocor sharply boosted the share price of Peptech. It jumped from A$1.85 to a record high of A$3.45 during the week, before falling back to finish the week at $2.25.