AGM and Chairman's Address
February 14 2008 - 9:13AM
UK Regulatory
RNS Number:0209O
Arana Therapeutics Limited
14 February 2008
FOR IMMEDIATE RELEASE 14 FEBRUARY 2007
Arana Therapeutics Limited
Annual General Meeting: 2008
CHAIRMAN'S ADDRESS
Arana Therapeutics Limited, (AIM: AAHx ASX: AAH) (the "Company"), the Australian
biopharmaceutical company that uses superior technology to develop next
generation drugs that will improve the lives of patients with inflammatory
diseases and cancer today held its Annual General Meeting in Australia.
Post the meeting the Chairman Mel Bridges made the following statement:
We have come a long way over the past year and the Company you have owned in the
past is a very different one today as a result.
These changes have brought significant challenges - and also significant
opportunities for you as the owners of the Company.
I welcome both EvoGenix and Peptech shareholders to this meeting - the first
annual general meeting of Arana Therapeutics - a company that as a result of the
merger is one of Australia's leading biotechnology companies.
With the changes to the Company, we have also seen significant changes to the
Board. The Board changes are partly a result of the merger and some members have
found it necessary to move on due to changed external commitments.
As you are probably aware, I hold my position of Chairman on an interim basis,
and we are seeking an appropriate recruit to fill the position permanently. We
are also in the process of seeking a further director to ensure a majority of
independent directors.
I would like to start today with a quick overview of where we've come from -
with the merger of Peptech and Evogenix - and the establishment of Arana.
Peptech was probably Australia's most successful biotech after CSL in terms of
delivering commercial outcomes.
Excellent science led to the development of anti-TNF international patenting
activity in the 1990's. The anti-TNF's have given rise to a whole class of
important drugs against auto-immune diseases.
At a time when it had negligible resources, Peptech negotiated licensing deals
with two major companies marketing blockbuster drugs drawing on the science
described in its patents.
Peptech recognised the potential of domain antibodies and invested in the UK
start-up company Domantis, to get access to this technology.
That prescient investment led to this year's profit of $136 million when we
finally sold our equity in Domantis.
The Domantis investment was not only successful in terms of immediate financial
returns, it also gave us the rights to the technology behind our leading
compound - ART621 - which is going into Phase II clinical trials this year. As
well as that we have access to two further therapeutic targets for future
development.
Prior to the merger, Peptech was seeking to bulk up its therapeutic pipeline,
mainly in the antibody space, through acquisition of companies with near-clinic
drug candidates.
Evogenix was also a very successful biotech company.
EvoGenix was founded in 2001 to develop and commercialise a protein optimisation
technology originated by the CRC for Diagnostics/CSIRO.
The company narrowed its focus to antibodies and acquired a US-based company,
Absalus Inc., which had a complementary antibody humanisation technology. That
resulted in (as far as we know) the only independent company in the world with
proprietary technologies that can humanise and optimise a research antibody to
be ready for human clinical development.
EvoGenix successfully floated on the ASX in 2005 and its value continued to rise
as successes were reported. Shareholders in EvoGenix saw their investment at
listing increase more than four times.
EvoGenix went on to sign contracts to humanise/optimise antibodies with three
companies, including GlaxoSmithKline and CSL. These projects strongly validated
the technologies - and will also potentially provide milestone payments and
royalties if/when these companies progress the antibodies developed through
clinical trials and into the market.
At the same time, EvoGenix used its technologies to develop in-house antibodies
with desirable properties, and started to progress them towards clinical trials.
The merger made eminent sense for both companies.
Peptech had cash, a good pipeline - although a small pipeline - and good people.
Evogenix had a good pipeline - again a small pipeline - plus an "antibody
engine" to continue generating prospective pipeline candidates, and good people
but it needed cash to progress its pipeline to clinical trials.
Both companies had a significant profile in the antibody field, and had decided
to focus there.
Before the merger, the value of the two companies was around $470 million. With
cash of $175 million, that clearly implied a significant value for our
technologies.
With market capitalisation of around $250 million now, the market is currently
valuing our technologies at minimal levels - and this is despite the success of
the Phase I clinical trial of ART621.
The message your new Board has taken from this is that the market is sceptical
of the ability of the Company to turn the promise of the technology into
shareholder value.
We recognise there has been dissatisfaction among some former Peptech
shareholders and, in the short time since the merger, we have started to address
the issues as we understand them.
As with any merger, extracting efficiencies is one of our key goals - and
challenges. These efficiencies we hope will not only flow onto an improved share
price, but also focus us on developing our core scientific assets.
Two weeks ago the animal heath subsidiary was sold. The long selling process
established that the value ascribed to the business was not in fact able to be
realised and the board instituted a new sale process with no constraints or
expectations.
The result is that the business has been sold - freeing us of losses that would
have to be incurred to develop the businesses into a viable operation.
We estimate that, in addition, it would also have taken at least two years - and
cost around $3 million to $5 million - to register the key product Suprelorin in
the USA.
We are now free of these costs and instead we will be paid a reasonable royalty
on actual sales - and that should provide us with modest revenues.
On top of that a major management distraction on a non-core activity is gone.
The merger brought two management teams together. One of the Board's challenges
has been - and remains - how to motivate our key people and align their
interests strongly with those of shareholders.
We are in the process of developing a new long term incentive scheme that we
hope will ensure the rapid development of our key drug candidates remains on
track and new opportunities are developed. Attracting and retaining high quality
staff is key to our success.
This new scheme will be put to shareholders when finalised. We consider it very
important to have it in place as soon as possible.
Over the next year the Board will be working with management to ensure overheads
are minimised, systems are efficient and resources are focused on maximising the
prospects for clinical success from our pipeline.
The most value-adding decisions a biotech company makes are those to kill off a
project that is likely to fail, and to kill it off at the earliest possible
stage.
As the majority of projects do in fact fail - and the cost of progressing
increases exponentially through the development stages - it is vital that we
focus our resources on only those assets we consider core assets.
Arana's senior management team has been reviewing and prioritising the Company's
pipeline of drug candidates. We are focusing our resources on the candidates
that offer the greatest potential to add shareholder value.
Candidates that do not receive resources in the short term will be assessed for
whether they should be licensed or sold to other parties for development,
whether they should be held in reserve, or simply abandoned.
Our strong cash balance is one of our key assets. As you know, the clinical
development process is a lengthy and costly process. The constant struggle for
funding to keep development programs alive is a major feature of our industry.
It is also a major contributor to the failure of many potentially successful
biotechnology companies. Our successful investments and strong revenue streams
set us apart from many other companies in the drug development field.
Your Board is focused on ensuring that this significant asset is best deployed.
This asset will allow us the time needed to develop our core drug candidates to
the optimal commercialisation point. It also allows us to develop multiple
candidates - that gives us multiple chances of commercial success.
We have a great advantage here - and one that promises to deliver significant
shareholder gains at the point of commercialisation.
We have come a long way over the past year. Our pipeline is focused, we have a
significant cash reserve - which is all the more valuable in these times of
market volatility - and I believe we have the management talent to develop our
core assets into exciting therapeutic products and shareholder value.
Significant challenges remain - but your Board is confident that our combined
resources will lead to the further development of Arana Therapeutics as one of
Australia's leading biotechnology companies.
Note: attached via pdf links is the presentation given at the AGM
http://www.rns-pdf.londonstockexchange.com/rns/0209o_-2008-2-14.pdf and
newsletter http://www.rns-pdf.londonstockexchange.com/rns/0209o_2-2008-2-14.pdf
For further information, please contact:
Arana Therapeutics Limited
Dr John Chiplin, Chief Executive Officer +61 (0)2 8061 9900
Niall Henderson, Chief Financial Officer +61 (0)2 8061 9900
Buchanan Communication
Lisa Baderoon/Rebecca Skye Dietrich +44 (0)20 7466 5000
Nomura Code Securities
Charles Walker +44 (0)20 7776 1206
This information is provided by RNS
The company news service from the London Stock Exchange
END
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