Biotechs battle for recognition

Big pharmaceutical groups face a growing risk of David-and-Goliath legal battles with biotech partners, analysts say.

The warning comes just weeks after Cambridge Antibody Technology (CAT) the British biotechnology company got a High Court date for its legal action against Abbott Laboratories over royalties and after Biota, an Australian biotech minnow, with a market capitalisation just £26m, sued Glaxo SmithKline (GSK), the world's second biggest pharmaceutical group.

Martyn Postie, director of Cambridge Healthcare & Bio-tech, a consultancy, said the litigation would be watched closely by other big firms, given the sector's growing reliance on royalty and milestone payments from big pharmaceutical licensing partners.

'I think we are going to see a lot more of these actions, the biotechs have no choice,' he said. 'In the current climate, they cannot go back to the stock market for more money to develop product. They have to rely on payments from their licensing deals.'

In the current climate Biotech firms currently get about 90% of their funding from product licensing agreements with pharmaceutical companies. Analysts say that pharmaceutical groups, facing a lack of new discoveries, are increasingly reliant on the biotech sector to come up with their next big blockbuster.

Postle says that the power balance between the two sides is shifting. He said: 'As more pharma companies say to biotech: "We are relying on you because our in-house r&d is not as productive as it needs to be", the biotechs will say: "well if we are this important to you, this is a two-way street and you have to do your best for our products".'

Biota has taken this attitude in a lawsuit against GSK. The Australian firm is seeking an estimated £210m, claiming that GSK failed to honour a marketing contract by abandoning promotion of Biota's Relenza flu remedy.

Source: London Times