Phosphagenics loses court case, shares plunge 89pc
Health & Biotech
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Phosphagenics has lost a significant claim against big pharmaceuticals company Mylan and its shares are being hammered, plunging 85 per cent as soon as the market opened on Monday morning.
Phosphagenics (ASX:POH) has a patented drug delivery system called targeted penetration matrix (TPM), which is based on Vitamin E and is aimed at improving the delivery and effectiveness of consumer and animal health products.
It told investors it was unsuccessful in all of its claims in the Singapore International Arbitration Centre (SIAC).
The stock had fallen 89 per cent after an hour of trading to 0.3c, an all-time low, after closing Friday at 2.6c.
To put it in perspective, the company has been trading on the ASX since 1993, when it was a listed investment company called Greenchip Development Capital, until it pivoted to the biotech sector and changed its name in 2004.
Phosphagenics launched the court case in early 2016, suing Mylan Laboratories, a subsidiary of Mylan, for failing to uphold research and licensing agreements.
Phosphagenics entered into a master research agreement (in 2011) and a licensing agreement (in 2012) with a company called Agila Specialties to develop and commercialise a formulation combining TPM with daptomycin, a well-known antibiotic, for the treatment of complicated skin and bloodstream infections.
It was expected to have commercial advantages over the existing formulation of daptomycin, which is currently marketed by Merck under the brand name Cubicin.
In 2013, Mylan, a $26 billion US pharma company, acquired Agila and took over the development of the drug.
The arbitration, filed with the SIAC, alleges Mylan breached several provisions under the two agreements, including “fraudulent or negligent misrepresentations, breaches of confidence and/or unjust enrichment in relation to intellectual property and commercial licensing terms, amongst others”.
Phosphagenics claimed $380 million, according to The Australian.
By August last year, the company had already spent $2 million defending its position.
But after a long, nearly two-year wait, the company said this morning “the board is very disappointed to announce that Phosphagenics was unsuccessful in all of its claims”.
It is a disaster for the company and in its statement Phosphagenics was not hiding from investors.
“As shareholders will recognise, this arbitration loss has a serious impact on the company and its board will need to carefully consider the alternative courses of action available to it,” it said.
“Phosphagenics has spent approximately $5.6m on arbitration and legal fees to date. The board must take into account a significant adverse costs order.”
A date will now be set to make submissions on costs which are reserved to a final award on costs.
The company says the licensing agreement remains in place, requiring Mylan to continue to take “commercially reasonable efforts to develop TPM-daptomycin, not to sell a generic daptomycin and to pay royalties to Phosphagencis on commercial sales.
“Phosphagenics may be required to enforce its remaining rights to require Mylan to act in line with requirements of the licencing agreement,” the company says.
It has $2.3m cash in the bank, with $200,000 in research and development incentive refunds expected before the end of the year.
More than 62 million shares traded hands early on Monday morning.