13-FEB-2003 THU 13:33 STEPHEN KWIK FAX NO. 98897607 P, 01 *...

13-FEB-2003 THU 13:33 STEPHEN KWIK FAX NO. 98897607 P, 01 * ___._
' ' . , PEPTECH
ABN 98 002 951 877
TO: ASX
Company Announcements Office
.
AUSTRALIAN STOCK EXCHANGE
FAX NUMBER 1300 300 021
DATE: February 13,2003
NUMBER OB PACES: 27 (including thk pge)
FROM: Niall Henderson
Peptech Limited,
Suite 2, Level 3, Building A, 11 TalaveraRoad
North Ryde, NSW 21 13, Australia or
(Locked Bag 2053, North Ryde NSW 1670)
Tel: +61 (Q2 9870 8788 Fax: "61 (0)2 9889 8088
E-mail: cornorate&emech.com
OURREF:
Dear Sir,
Attached are the Chairman's and Managing Director's addresses to today's AGM, together
with the presentation on Domantis.
Yours sincerely
p!, Mcl;ee
NiaN Henderson
Company Secretary
13-FEB-2003 THU 13:33 STEPHEN KWIK FAX NO. 98897607 P, 02
PEPTECH Limited
CHAIRMAN’S ADDRESS TO ANNUAL GENERAL
MEETING - 13 February 2003
It is a pleasure to welcome shareholders to Peptech Limited’s Annual General
Meeting. Your Annual Report outlines the strategic and operational highlights for
the 2001/2002 year. l appreciate the fact, that normally, shareholders would
expect their Chairman to report to them in the annual report. As I had not been
appointed Chairman at the time the annual report was finalised, it was not
possible for me to write a Chairman’s report. You can, however, expect me to
report to shareholders in both the half-year and full year reports in the future.
I am happy to be able to report that we have made a great deal of progress
during the past year. I would like to take some time now to briefly review the last
year and to summarise developments since September 30 and outline the key
opportunities and challenges ahead. The Managing Director, Stephen Kwik, will
follow me with a more detailed review of the operational performance of the
company.
Update on 2002
The 2001-02 year saw Peptech move forward on a number of fronts, particularly
in the area of continuing to grow and consolidate the company’s strong
intellectual property position. The result for the year was a loss of $8.9 million
compared to the prior year profit of $30.7 million. The prior year result included a
number of one-off items.
2002 started well. Several key patents were granted (I will comment on these
later) but after the end of the financial year we received a notice from Centocor
on 2dh October 2002 suspending the royalty payments due on the sale of their
product REMICADEB. l should point out that Centocor had in prior years made a
13-FEB-2003 THU 13:34 STEPHEN KWIK FAX NO. 98897607 P, 03
significant front end payment and royalty payments with respect to sales of
REMICADEB in six European countries, Canada and Australia. They have not
presented any evidence to Peptech giving their reasons for their apparent
change in belief. Your board and management team have gone on the front foot
in addressing this issue; we have had a meeting with Centocor and are confident
that Peptech’s patents cover the REMICADEB molecule. We remain confident
that we can resolve this dispute in our favour. Stephen Kwik will touch upon this
issue in his address.
Importantly Peptech remains in a strong cash position going forward into 2003,
particularly following a successful placement worth $10.3 million at the beginning
of the current year. Your Board will be focussed on strategic use of this capital to
build future growth and profitability.
Positioning strategy
I sincerely believe Peptech has the opportunity of being one of the true success
stories in the Australian and international drug development industry. The Board
and management team are committed to positioning the company as a
successful global player in a number of key human and veterinary drug areas.
This will be achieved both through Peptech’s own R8D program as well as the
company’s key relationship with Domantis. We see the Domantis relationship as
pivotal in Peptech’s future success. Stephen Kwik and Greg Winter will talk more
about the Domantis relationship and drug development programs as part of their
presentations.
Peptech has a clear demonstrated track record in negotiating and closing
lucrative licensing deals with large multinational pharmaceutical companies. We
expect the company to continue to build on this expertise. The outlook for the
animal health division is likewise positive in the coming year and beyond.
n L
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Intellectual Property
Human:
At the core of every pharmaceutical development program lies a strong
intellectual property (IP) position. Peptech has established a significant track
record in the development and commercialisation of intellectual property. The
company has achieved a number of real successes over the past calendar year
with four (4) US patents in the binding ligands family being issued. In particular,
your company has significantly consolidated on, and extended, its IP position in
anti-Tumour Necrosis Factor (TNF) antibody therapeutics; these are used for the
treatment of inflammatory diseases such as rheumatoid arthritis and Crohn's
disease.
I am delighted to say, Peptech's goal of developing peptide- and protein-based
drugs, which act against certain molecular targets, is on track. The company's
strategy is to on-licence candidate therapeutics after early stage clinical trials,
thus avoiding the large expense of late-stage clinical trials.
Animal:
The development of the animal health division's animal contraceptive product
has progressed on schedule over the last year. Two patents covering the
formulation used in the companion animal contraceptive implant product
(Suprelorin@) were issued in Europe and the US.
When approved for use this will be the first product of its kind worldwide,
Peptech has lodged a number of patent applications around this area.
Importantly, research undertaken so far, demonstrates that nonsurgical
contraception of animals is commercially feasible.
3
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Domantis Relationship
The R&D collaboration with Cambridge (UK) based company Domantis has
continued to consolidate over the past year, with Peptech now holding a 36.1%
equity position. In our R&D collaboration in the area of anti-TNF, both partners
are focussed on producing the next generation of anti-TNF therapeutic products
that are easier and cheaper to produce with a corresponding ease and scope of
delivery to important sites of action. Domantis’ strengths in protein engineering
and intellectual property on the technology are perfectly complemented by
Peptech’s strong IFJ position on anti-TNF products.
The Domantis relationship also has the potential to expand the range of product
opportunities. Peptech has already appraised a number of potential targets for
the domain antibody approach and have drawn up a highly selected short-list.
The company would expect to take suitable drug candidates through pre-clinical
development and into clinical trials, to a point of optimum value addition before
on-licensing to major partners.
Corporate Governance
Your board is absolutely committed to best practice corporate governance
procedures. In the year to September 2002, the board received advice on valuing
options previously issued, using the Black Scholes method. The Board
concluded that it was not appropriate to apply a particular value to the options
due to the large number of subjective factors included in the Black Scholes
method. This coupled with the fact that a share price of $2.23 at September 2002
resulted in options issued during the year being well “out of the money”.
Shareholders should be aware that the Board has suspended the option plan that
was available to directors and employees.
4
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With regards to Director Retirement Schemes, your Board is aware that a
number of companies have suspended these schemes. As a Fellow of the
Australian Institute of Company Directors, I am also aware that this issue is
under scrutiny. We duly note current thinking on this matter and I can state that
this matter is on the Board agenda and shareholders can be assured the Board
will take into account best practice policies in Australia. It is my intention to
update shareholders in the half-year report on this matter.
As part of your Board's commitment to best practice in corporate governance,
shareholders, the market and the general public can expect to be fully informed
on matters of importance relating to the company. At my suggestion as
Chairman, the company will be embarking on a number of public seminars with
the goal of briefing and infonning interested parties on the company's plans,
goals and future objectives. These seminars will be held in the first half of the
2003 calendar year, with all presentations being available to all shareholders via
the ASX.
Dividends
In my short time as Chairman, I have already received a number of queries
regarding when a dividend will be paid. Firstly let me say that with the current
dispute with Centocor, dividends are not on the Board agenda. When the dispute
is resolved, your Board will assess how best the company's resources can be
used to increase shareholder value.
Board Composition and Skills
The past year has seen significant instability on your Board. Most notably I am
your fourth Chairman in just over a year. I fully appreciate this is not satisfactory
for any company, especially a public company. I can assure shareholders that, in
accepting the Chairman's position on the Board, I have done this as a long-term
commitment. With the support of my fellow new non-executive director, Jim
5
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Hazel and other board members, our commitment is to instil strong corporate
governance, and importantly to build shareholder value.
One of my first priorities is to discuss and determine with your Board who the
new members of the Board committees will be. Once decided, members of these
committees will be communicated to shareholders in the half-year report.
I would like to acknowledge the contribution of Dr Greg Winter who is retiring
from the Board effective this AGM. As a founder and director of Domantis, Greg's
retirement will allow him more time to concentrate on his involvement in
Domantis and on providing scientific advice to Peptech. We sincerely thank Greg
for his invaluable input, particularly in respect of our patents and during the
Centocor matter, and his commitment to Peptech over many years, as scientific
advisor and Board member. The company looks forward to our continued
association and furthering our close relationship.
As Chairman, shareholders have my commitment to continue to assess your
Board's needs and skill requirements, and to build a strong and competent Board
through 2003.
Employees
Peptech is fortunate to have a highly qualified and experienced staff that are
capable of running a far larger and more complex business. This deliberate HR
strategy by the company will support our desire to grow both revenue and
profitability significantly in the immediate years ahead.
On behalf of the Peptech Board, I would like to thank all employees for their
energy and focus during 2001/2002. It was a year of exceptional challenges, and
our employees rose to the task with distinction. Congratulations1
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Conclusion
It has been very satisfying for the Board to observe how all employees adjusted
to the new tasks at hand throughout the year and it is pleasing to see tangible
progress towards stabilisation at Board level.
The Board is confident that this will be to the benefit of all shareholders and looks
forward to another progressive and successful year for the company.
Me1 Bridges
Chairman
13 February 2003
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MANAGING DIRECTORS ADDRESS -Annual General
Meeting Held on 13 February 2003
I would like to open my address at this Annual General Meeting of Peptech by
confirming that Peptech is at a stage in its evolution where it is positioned to
become a major biotech company.
In terms of revenue sources, on our human activities we rely on the licence
agreements, while on the animal health side, we have the consistent sales of
OvuplantB and the potential of Suprelorin@, which could well become a block
buster drug in the animal health market.
I will now address each of the components, as I see them, that will give Peptech
the opportunity to springboard into the future.
HUMAN
Intellectual Property
We have very strong patents in the anti-TNF area where we had four divisional
patents issued in the US in the last calendar year. We expect several more to be
issued in the US in the foreseeable future. The need for several divisional
patents to be granted is due to the fundamental difference in the patenting
procedure adoptad by the European and the US patent offices. In the European
patent office procedure, one patent covering several antibodies can be applied
for. In the US, each invention or discovery is subject to a separate divisional
application.
With respect to the domain antibodies against TNF that Domantis is developing
for Peptech, the patent will be owned by Domantis, but pursuant to the Research
Collaboration Agreement, we will be given an exclusive assignment of the
13-FEB-2003 THU 13:35 STEPHEN KWIK FAX NO. 98897607 P, 10
patent. This will therefore result in a new patent being issued for the domain
antibody product, with a patent life of 20 years.
Centocor
We have two non-exclusive licence agreements under which we have assigned
the rights to use our anti-TNF patents to Centocor and Abbott. In exchange, we
are entitled to receive royalties based on the sales of their respective products in
which our IP is being used.
We received a letter from Centocor in October 2002, stating that after their
review of our patents, in their view, their product REMICADEB did not infringe
our patents. A meeting was recently held with Centocor during which we
submitted the scientific data that we have, showing that REMICADEB does
infringe our patents. They have taken our data and following the supply of further
information from us, are currently assessing the evidence. I cannot, at the
moment, comment any further other than to say that in my assessment, the
meeting went well, we are in touch and expect a response from them within a
week. As stated in our public announcements on this issue, we are extremely
confident that we have the data that clearly demonstrate that REMICADEB falls
within the scope of our patents. We remain confident that a resolution to the
matter will be reached soon. The first steps towards this resolution have, I feel,
been made by the visit to Centocor.
Abbott
On the Abbott agreement, Humifam has received FDA approval on 31 December
2002. Approval in Europe is expected around mid 2003. It seems from media
releases that Humiram has just started to become available in US pharmacies.
The usual commercial confidentiality clauses prevent Peptech from disclosing
when we are going to receive the milestone that is to be paid on the commercial
13-FEB-2003 THU 13:36 STEPHEN KWIK FAX NO. 98897607 P, 11
shipment of Humiram. However, we are currently in talks with Abbott on this and
other issues.
DOMANTIS
Our investment in Domantis Limited, the leading domain antibody drug discovery
company, has proven to be an astute investment decision.
Domantis is continuing to perform beyond expectation. A few months ago,
Domantis announced that they had entered into a partnering arrangement with
Abbott, who are one of the more innovative large pharmaceutical companies and
who have invested heavily in the antibody area. Their decision to enter into this
relationship with Domantis is a significant endorsement of the Domantis
technology platform.
Just last week Domantis announced the grant in the US of a new patent that
offers an alternative to the phage display method for protein selection.
One of the reasons for Domantis’ success is the exceptional team of scientists it
has been able to attract and its team has recently been strengthened by the
appointment of Dr Steve Holmes as Senior Director, Therapeutic Targets. Dr
Holmes has over 18 years experience in the international pharmaceutical
industry and has been responsible for directing antibody research and managing
pre-clinical studies.
On Tuesday, we announced that the one of the lead domain antibodies against
TNF being developed for Peptech, pursuant to our research collaboration
arrangement, will undergo pre-clinical trials next month. This is obviously a very
significant development and this will be the first time that a preclinical evaluation
of domain antibodies has been conducted.
Once proof of concept in-vivo has been demonstrated we have several
alternatives. One is to develop it further before entering into commercialisation
13-FEB-2003 THU 13:36 STEPHEN KWIK FAX NO. 98897607 P, 12
arrangements with a large pharma, or we could immediately enter into a
collaboration with a large pharma to jointly develop this product. The ultimate
return to Peptech would be more if we take the development further. For such a
potentially revolutionary product - which could well supersede existing anti-TNF
products -we would be looking for part ownership of the product and to share in
the profit as opposed to receiving royalty income only.
In the same press release, we also announced that we agreed to pay our final
commitment to Domantis approximately two months early. This is primarily to
show our recognition of their excellent progress and to enable Domantis to
aggressively pursue their research programme.
Last, and by no means least, Or Greg Winter who is resigning from the Board
effective from this AGM, will be devoting more of his time on the affairs of
Domantis. With the impending increase in activities by Domantis, his additional
input into the affairs of the company is now, more than ever, needed.
I am sure that you will agree that the association with this strategic partner will
prove immensely beneficial to Peptech.
ANIMAL HEALTH
Peptech Animal Health’s intellectual property porffolio was enhanced during the
year with the granting of patents for animal contraception in the major US and
European markets.
As stated earlier, OvupIantB is expected to continue to earn revenue for the
Company. Owplant@ is by far the most popular ovulating produd in the
thoroughbred horse breeding industry. However the limited population of
thoroughbreds in the world restricts the size of this market. Although the product
is premium priced, it is now making significant inroads into the more price
sensitive chilled and frozen semen markets.
13-FEB-2003 THU 13:36 STEPHEN KWIK FAX NO. 98897607 P, 13
Suprelorin@, the domesticated pet contraceptive product. was submitted for
registration in Australia and New Zealand last year. It could well be a block
buster product provided the development and marketing of this product is
handled carefully. We have just had a meeting with one of the largest players in
the veterinary products area with marketing infrastructure that will do justice to
the market potential of an international product that Suprelorin@ clearly is. I will
not elaborate further at this stage other than to say that the meeting was very
fruitFul and we hope to be in a position to issue a public release on this matter
shortly.
STRONG MANAGEMENT TEAM
We have a strong science team led by Dr Phil Jennings as our Chief Scientific
Officer. Phil, together with Dr Greg Pullen and Dr Anthony Doyle, has monitored
the anti-TNF domain antibody that Domantis has been developing for us. Dr Tim
Trigg, Managing Director of Peptech Animal Health was responsible for the
development of Ovuplant@ and now for Suprelorin@. Tim is involved with me in
the on-going commercial negotiations on Suprelorin@. Our patent strategy is
ably controlled by Dr Greg Pullen, who, by virtue of the number of new divisional
filings in the US, had been rather busy. It must have been tremendously
rewarding for him to see the granting of the four divisional patents in the US
recently, and there are more to come. Dr Paul Schober is responsible for
marketing OvuplantB. He has successfully put Ovuplant@ into every major
horse stud in Australia and New Zealand. Paul has also taken on the
responsibility of Investor Relations during the year. David Edmonds is our Quality
Assurance Manager who was responsible for Owplant@ registration and who is
now busy in handling the registration of SuprelorinB in Australia and New
Zealand. The Scientific Advisory Board, chaired by Dr Geoffery Grigg, has been
invaluable in discussions with all of the above.
13-FEB-2003 THU 13:36 STEPHEN KWIK FAX NO. 98897607 P, 14
The scientific team is supported by Niail Henderson, our Chief Financial Officer
and Company Secretary.
The management team will be the nucleus for the growth in expertise that
hopefully will propel us to the next level.
CONCLUSION
Finally, I would also take this opportunity to thank Greg Winter for his invaluable
service to the affairs of Peptech and relish the thoughts that we still have access
to his expertise. 1 am sure that you all will join me in wishing him all the best for
the future.
For the reasons I have outlined above, including the exciting collaboration with
Domantis. the commencement next month of pre-clinical studies on our lead
domain antibody, the potential of Suprelorin@, the rapid growth of the anti-TNF
products, and a favourable outcome with Centocor, I believe, and hope you
agree. that Peptech has come to an exciting phase in its development. With your
support, and with the continued support from the staff of Peptech. we can
develop this company into a major global biotech player.
Thank you for your presence here today.
Stephen Kwik
Managing Director
13 February 2003
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