FEB 16   We have also commenced arbitration proceedings against...

FEB 16

 
 
 We have also commenced arbitration proceedings against Mylan Laboratories Limited.  Previously we have not been able to provide much detail on this project due to contractual constraints.  The product under development with Mylan, daptomycin, is an injectable antibiotic marketed by Merck & Co. as Cubicin®, with annual revenues of around US$1 billion.  Cubicin® was launched and initially marketed by Cubist Pharmaceuticals which was taken over in late 2014 by Merck.  The relevant Cubicin® patents were due to expire in 2016, 2019 and 2020;  however, the validity of these patents was challenged by generic manufacturers and the latter two patents have been recently voided.   This means that the product is now due to come off patent protection in mid-2016. 
 
Unlike simple generic versions, Phosphagenics’ TPM®/Daptomycin product (developed in  collaboration with Agila Specialties and Mylan) has  multiple technical advantages to commercially  differentiate it from Cubicin® and other generic daptomycin competitors.  We believe this differentiation supports the potential for  significantly improved market share and revenue.  This TPM®/Daptomycin product is at present in late stage development towards a 505(b)(2) regulatory  filing in the USA.  We have asserted in our  arbitration notices that Mylan/Agila Specialties has breached several provisions under our agreements  related to TPM®/Daptomycin.  Despite the arbitration proceedings, Phosphagenics’ existing commercial agreement with Mylan remains in full force and effect pending the Arbitrator's decision.  The arbitration hearing, which is taking place in Singapore, is expected to be scheduled for late 2016 with a judgement expected sometime in 2017.  
 
We expect that the Mylan arbitration could be a  notable cost to the Company and have already built an allowance into our 2016 and 2017 budget for this.  Having said that, we also believe that we have a strong claim and a favourable outcome would provide a resolution to the claimed breaches in addition to the revenues that are expected to flow to Phosphagenics from the existing agreement.