The investors of Phosphagenics Limited (ASX: POH) experienced a set back after the company has lost a significant claim against big pharmaceuticals company Mylan. The share of the company plunged terribly by 85% when the market opened this morning.
Targeted penetration matrix has been patented by Phosphagenics. This drug which was produced by the company is rich in Vitamin E and it is used to improve the delivery and effectiveness of products related to consumer and animal health. The company told its investors in the Singapore International Arbitration Centre (SIAC), all the claims made by the company was unsuccessful. After this news, within an hour the stock price tumbled down by 89% and was trading at 0.3 cents which is an all till low price.
Early in the year 2016, the company sued Mylan Laboratories (a subsidiary unit of Mylan) for failing to maintain the agreements for the purpose of research and licensing.
There was a master research agreement between Phosphagenics and Agila Specialties in the year 2011. There was further a licensing agreement (in 2012) in order to develop and commercialize a formulation combining TPM with daptomycin which a popular antibiotic is used for treating complicated skin and bloodstream infections. The company expected that it would enjoy the commercial advantages over the existing formulation of daptomycin. Now this drug is sold under the brand name Cubicin and is marketed by the company Merck. Now in the year 2013, Agila got acquired by a $26 billion US pharma company Mylan. Mylan started working on the development of this drug. As a result of this, a negotiation was filed with the SIAC who claimed Mylan has breached several provisions that were made under the two agreements. It includes fraudulent or negligent misrepresentations, unfair enhancement in relation to the intellectual property, breaches of confidence as well as the commercial licensing terms, amongst others.
The claim amount of Phosphagenics was $380 million. In the month of August 2017, the company made an expenditure of $2 million to defend its position. However, this did not work as the verdict was not in favor of the company. The board was also very disappointed to make an announcement about the unsuccessful claims of Phosphagenics. The outcome was a disaster.
Now the company needs to be very careful to look for an alternative course of action, as this arbitration loss will have a serious impact on the company. There was about $5.6 million used as arbitration and legal fees to date. The company states that it holds the licensing agreement. Now, Mylan needs to make commercially reasonable efforts in order to develop the drug TPM-daptomycin. Also, Mylan needs to pay royalties to Phosphagenics in case of commercial sales of the drug.
By the end of the day, the share price of the company was down by 88.462% and the share price closed at A$0.003 with the market capitalization of A$41.01 million.
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