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Benitec Continues to Work on Image as it Releases Financials for 1H of Fiscal 2004/2005

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Following its recent management shake up, it appears Benitec is taking advantage of every opportunity to reassure the world that its history of litigiousness is just that — history.

This week the company released its financial results for the first half of its fiscal year 2004/2005, and in an accompanying director’s report, Benitec’s new chairman Raymond Whitten stressed the company’s “increasing focus on drug development” and its move away from intellectual property litigation.

Under the direction of its former CEO, John McKinley, Benitec sued peer Nucleonics and reagent firms Ambion and GenScript for alleged patent infringement (see RNAi News, 4/2/2004). The company also sued partner Promega for allegedly failing to meet its payment obligations under an IP-licensing arrangement (see RNAi News, 7/30/2004).

Benitec’s aggressiveness paid off with Ambion and GenScript, which settled the lawsuits by taking a license to the IP in question. However, the company had less success with Nucleonics and Promega, both of which are fighting back in court. Worse still, Nucleonics has challenged Benitec’s core IP in the US, Europe, and Australia (see RNAi News, 9/10/2004, 10/8/2004, and 1/14/2005).

In an apparent bid to get back on track as a drug developer, Benitec said in January that McKinley had resigned and that COO Sara Cunningham — who joined the company from recent acquisition Avocel — had been named his replacement. A week later, Cunningham told RNAi News that Benitec would now be maintaining its “focus on drug development [and allowing] others the ability to focus on drug development.”

Her words were echoed this week in Whitten’s report, in which he stated that Benitec’s “principal activities are the development of therapeutics to treat HIV/AIDS, hepatitis C, and diabetes and obesity. Ancillary to these activities [is] licensing the company’s intellectual property to third parties.

“The company is intensely focused on therapeutic development,” he added.

The Financials

Benitec reported revenues in the six-month period ended Dec. 31, 2004, of Au$932,326, up from revenues of Au$64,099 in the year-ago period. Driving the growth was Au$813,723 in licensing revenues Benitec recorded during the last six months of 2004. The company recorded no licensing revenues for the same period a year earlier.

The company’s expenses during the six-month period 2004 jumped to Au$6.4 million from Au$4.4 million year over year. The cost increase in part reflects higher marketing and administrative expenses during the period.

Benitec’s net loss for the last six months of 2004 rose to Au$5.4 million, or Au$6.43 per share, from a loss of Au$4.3 million, or Au$6.96 per share, in the last six months of 2003.

As of Dec. 31, 2004, Benitec had cash of roughly Au$3 million, a sharp decline from Au$9.5 million the company had at the end of 2003.

Cunningham told RNAi News this week that Benitec’s monthly operating costs are about Au$760,000, but the company’s burn rate “will start to ramp up over the next year … as we get into increasing GMP manufacturing” and other clinical trial-related activities.

“Our burn rate will stay fairly consistent through the rest of this fiscal year,” which ends on June 30, Cunningham said. She added that Benitec expects its monthly burn rate to increase to nearly Au$1.3 million towards the second half of calendar year 2005.

Cunningham said Benitec is currently in compliance with the Australian Stock Exchange requirement that a listed company “have the facility to fund ... operations,” but she declined to comment on how long the company’s current cash position will allow it to do so.

Cunningham did note that Benitec continues to fund raise, and that the company is in discussions “not only [with] our existing shareholder base in Australia, but also several groups within the US.” She said that Benitec expects to have closed a financing arrangement “within the four to six weeks.”

Additional support for Benitec’s bottom line is expected to come from cost-control measures implemented during the first half of fiscal 2004/2005.

“Operationally, we have always run a very tight ship,” Cunningham said. “The majority of the [cost] control [that] has occurred over the last several months is related to legal [activities] — corporate and intellectual property issues. Although you would think for a biotech that would be a relatively insignificant part of the budget, that has not historically been the case for Benitec,” she noted.

Efforts to control spending “have been helped considerably by expanding our in-house [legal] team,” Cunningham said, citing the June 2004 appointment of Sally Brashears, a lawyer with California-based law firm Moser, Patterson, & Sheridan, as the company’s vice president of intellectual property. “We also have a paralegal and a patent agent” on the payroll, which has brought all of the company’s patent prosecution activities in-house.

Additionally, the company has either eliminated or brought in-house “a lot of the general corporate legal [operations] that [were] being charged by outside counsel,” she said.

As for how Benitec’s IP litigation is proceeding, Cunningham declined to comment beyond reiterating the company’s “stated corporate goal [of resolving] our intellectual property disputes, and efforts to do so are continuing.”

— DM

 

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