biota to probably be in asx 300, page-16

flu drug makes an amazing recovery http://www.theaustralian.news.com.au/common/story_page/0,5744,18075933%255E5001641,00.html

Flu drug makes an amazing recovery

IT is the dead-cat drug that just won't die.

The commercial revival of GlaxoSmithKline's Australian-developed influenza drug, Relenza, was given local form last week with the formal re-opening of one production line at the pharmaceutical giant's factory in Melbourne.

The first of two "new" production lines for Relenza, which will cost about $30 million, was formally opened by Health Minister Tony Abbott and GSK's local managing director, Paul Lirette. It is hard to know which of the two would have wanted to be there less.

Certainly both kept their visit to the Boronia factory very quiet indeed. News of the successful opening ceremony is on neither the Health Minister's website nor, more amazingly, GSK's.

That might reflect the fact that Abbott, Lirette and the international executive hosts at GSK are very recent converts to the idea that Relenza is worth anyone's hard-earned cash. Relenza's return is an obvious by-product of a global hysteria over bird flu and the subsequent fear that we could face a new global flu pandemic.

The belated embrace of Relenza by the federal Government was confirmed on December 16 with its order for 1.8 million "additional courses" of the home-grown flu drug. Additional indeed. Until that order, Australia's Relenza reserves stood at a grand total of 24,570 courses.

Not that we stood unprepared. Even though Australian taxpayers effectively spent $247 million on the development of Relenza, the Government ended up building its $555 million pandemic defence around Relenza's dominant competitor, Roche's Tamiflu.

So why did we spend $114 million on a Tamiflu stockpile? Most likely because Relenza's owners, GSK, had demonstrated such a palpable lack of confidence in the safety, effectiveness and value of the drug.

To get a clear idea of the extent of GSK's failed faith, just grab a copy of the company's opening defence of a $430 million lawsuit launched against the multinational by its Australian partner in the drug, Biota Holdings.

Biota was the first corporate supporter of Relenza - and it still shares with the CSIRO a 7 per cent royalty from sales of the drug. Up until mid-way through 2005, that meant very little.

This is because in September 2001, without telling Biota, GSK quietly decided to withdraw the drug and to suspend research in a new form of the drug.

Biota claims it did not know until the start of 2004 flu season that GSK had dropped Relenza. It maintains that the first and only formal confirmation of GSK was delivered in the 2005 defence.

Lodged with the Victorian Supreme Court in May 2005, the GSK defence reflects extensively on US concerns about Relenza's side-effects and the views of European governments that the drug was "poor value for money".

And GSK seems to itself conclude that its drug should be no one's choice for a pandemic stockpile.

The document twice warns: "Relenza is less suitable than Tamiflu for stockpiling by governments and other authorities in order to cope with an influenza epidemic or pandemic."

If that is the case, someone should perhaps make a call to the French Government, which recently placed an order for 9 million courses of Relenza. It might not come as music to Tony Abbott's ears either. After all, his order will cost more than $40 million.

To be fair to GSK, it does seem that its view of Relenza has changed profoundly since the Biota defence was written.

The best illustration of the change of heart came in October last year in a market briefing by the man widely regarded as the chief executioner of Relenza, GSK's chief executive J.P. Garnier.

While still openly wary of Relenza's delivery system (it is inhaled, unlike Tamiflu, which is a pill), Garnier agreed that the company just could not produce the stuff fast enough to meet the demand and said GSK had kick-started research on a way of delivering the drug and was looking at reviving research into the preventative form of the drug.

For all that, Garnier's tone was hardly celebratory. And that probably reflects the unusual corporate paradox he finds himself in. Garnier was intimately involved in the disappearance of Relenza, a decision that is at the heart of Biota's $430 million claim.

The dead drug's revived popularity could add billions to GSK's revenues. But it also seems to confirm Biota's view that its pharmaceutical competitor acted too hastily in trying to kill their drug.