Biota Relenza revelation a shot in arm for biotechs Richard Gluyas October 22, 2005 THE old man of the nation's biotech sector, Biota Holdings, with its miraculously revived anti-flu drug Relenza, has reignited investor interest in a sector which periodically promises much but has so far delivered little.
The revelation in The Australian this week that GlaxoSmithKline would resume production of Relenza at its Melbourne plant completes a back-to-the-future scenario, with Biota likely to be a key driver of future activity in the sector.
The great irony is that Relenza's centrepiece role, contemplated in a submission to the federal Government by a GSK predecessor company in 2000, was allegedly torpedoed by the very company that advanced it.
The Biota and CSIRO-conceived drug, hailed by eminent scientist Gustav Nossel as a "remarkable Australian triumph", had just been launched in May 1999.
Until that time, GSK had benefited from $274 million in research and development grants and funding for its Melbourne plant under the Government's Factor (f) industry assistance scheme.
GSK said in its Australian science capability submission in January 2000: "Worldwide sales of Relenza will generate royalties to (GSK) and Biota over the next 15 years.
"These royalties will contribute to sustaining the R&D activities of both Biota and (GSK)."
If that was the expectation, the result was vastly different, following the merger of Glaxo Wellcome and SmithKlineBeecham, also in January 2000.
In May last year, Biota boss Peter Molloy launched a massive legal claim against GSK, claiming Relenza's licensee had dumped the drug, allowed rival Roche's product Tamiflu to corner the global market in flu antivirals and caused royalty payments to dry up. GSK is vigorously defending the case, in which its antagonist is seeking $308 million to $430 million in damages.
So much for Biota acting as a beacon for the nation's biotech R&D effort, or so you would think. But then came bird flu.
GSK is now spending tens of millions of dollars to restore a production capability for Relenza at its plant in Boronia in Melbourne's outer-east, amid panic buying of Tamiflu by governments for national stockpiling purposes and a documented case of human resistance to the drug by a strain of bird flu.
Boronia will be the only facility outside France to make Relenza.
Federal Health Minister Tony Abbott has also confirmed that the Government is negotiating a large stockpiling order for Relenza after preferring Tamiflu for a $100 million-plus allocation in the 2004 budget.
This reporter argued at the time, on public policy grounds, that there should have been a parallel Relenza order to ensure diversity of supply.
The Government, which said Tamiflu was easier to administer because it came in tablet-form rather than the inhaled Relenza, would also have reaped some return from its investment in an equally effective drug.
News of the Tamiflu order came shortly after Biota launched its Victorian Supreme Court claim against GSK, and it seemed to represent confirmation of the bleak outlook for the drug and the company.
Relenza's credibility, though, received an unexpected boost when The Australian reported in mid-August that the German Government had placed a large stockpiling order for the drug.
While the Intersuisse biotech index shows the sector reached a nadir last April, it really began to hit its straps in August, coinciding with news of the German order and the run-up in Biota's share price.
Tom Quirk, chairman of biotech Virax which is developing an HIV/AIDS treatment, says the sector has been fired up by two developments - Relenza's revival and CSL's announcement this month of unblemished phase III trials for its anti-cervical cancer drug Gardasil.
But the former Biota director says it's extremely difficult to quantify Relenza's likely benefit to the company.
"I once asked an analyst in New York about the size of the market in flu anti-virals and he said around $US1 billion," Quirk recalls. "I then asked him about the margin for error in that figure and he said plus or minus $US1 billion."
Biota is now a substantial company capitalised at more than $300 million, with its shares having increased almost seven-fold from a low of 40.5c on March 3 to a high of $2.75 on October 10.
But it is still a proxy for the overall sector, according to Quirk, in that there is no institutional representation on its share register. He says the small to medium-sized end of the biotech sector is supported largely by private investors with a strong overlay of day-traders.
It might help to boost liquidity, but at the same time it can "drive stocks all over the place".
While the sector has matured somewhat over the last 20 years, Quirk says the almost complete absence of substantial companies is a reflection of just how long it takes to develop drugs. "The other difference is that, in the US, you have an abundance of people experienced at every level - the science, clinical trial management, commercialisation, regulatory, manufacturing and marketing," he says.
"Putting CSL to one side, we have very bright people at the ideas end."
Quirk says medical devices like the Cochlear ear implant appear to be an exception, with that company able to bounce off the initial success of the Nucleus heart pacemaker leads when they were both part of the Pacific Dunlop conglomerate.
Like many companies in the sector, Virax is seeking funding to retain more value for its shareholders by completing phase II trials of its HIV treatment.
"(The sector) is yet to get one of these babies to a fully mature company," Quirk says.
"Most companies do get the funds they are looking for, but they might not like the terms."
As to the future of the latest mini-bubble, he says some biotechs will enjoy their moment in the limelight before again fading into relative obscurity.
"Others will be carried to a higher plateau, and we'll have to wait and see who they are."
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