Anti-infective drug development company, Biota Holdings (ASX:BTA) has seen its share price on a tear since earlier this year- tracking growth in sales of the Relenza drug - and growth in swine flu outbreaks.
Biota shares have risen by 300% since early 2009 - and it would be a brave person to suggest that more is not in store in 2010.
Here's why.
Biota has received written notification from Britain's biggest pharmaceutical company GlaxoSmithKline (LSE: GSK) that indicative royalties from sales of Relenza for the three months ended 30 June 2009, were $8.9m on Relenza sales of $122.5 million.
Relenza is anti-viral treatment Relenza, which can relieve swine flu symptoms.
With royalties to Biota for the complete 2009 financial year to total $45.0 million on Relenza sales by GSK of $638.7 million compared to $20.5 million and $304.4 million, respectively in F2008.
Effectively, a doubling of sales and royalties due to swine flu.
However, it has emerged today that GSK is preparing to sell even more swine flu drugs this year and next.
GSK has disclosed its plans include a commitment by GSK to increase its annual production capacity of the influenza anti-viral Relenza to 190 million courses by the end of 2009. This increase represents a threefold increase to GSK's previous capacity of 60 million courses.
Biota’s CEO Peter Cook reiterated there is a time lag between an order being placed and a recorded sale on the shipment of goods. The significant government stockpile orders placed after the swine flu outbreak in late April 2009, would appear as sales in future quarters.
GSK also disclosed that international governments were stockpiling large supplies of GSK's anti-viral treatment Relenza, which can relieve swine flu symptoms.
Production capacity of Relenza in its standard Diskhaler format will be increased from 60 to 90 million courses. Importantly, a further 100 million courses a year of additional capacity will be available as Relenza Rotacaps/Rotahaler.
This alternative Relenza treatment has been recently granted temporary approval by Swedish regulators and hence within the EU, for distribution during a pandemic.
Biota receives a minimum 7% royalty on global sales of Relenza by GSK and holds patent coverage in the major markets until at least December 2014.
While the positive effect of this expansion on Biota may be significant and GSK have confirmed it has contracts to supply Relenza to over 60 countries, the announcement is focussed on increased manufacturing capacity for Relenza, not orders or sales. Hence, the timelag.
GSK has stated that additional regulatory approvals will be required and that the capacity increases are planned for the end of calendar 2009. The expansion of Relenza capacity and any increase in resultant royalty payments, will not effect Biota's cash position until June 2010, at the earliest.
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