The biggest research and development event this year has been the licensing of the Merck human papillomavirus vaccine, Gardasil, in the US and Australia (see feature page in this Report).

Another area of significant achievement has been the work in supporting the internationalisation of CSL’s influenza vaccine. As already mentioned, we have now licensed our high quality Australian influenza vaccine in key European countries and started the clinical trials required for registration in the United States.

At the same time, we have responded to the international public health threat of bird flu by producing and testing an experimental vaccine against the H5N1 strain that has caused concern across a number of countries in and beyond our region. As the only flu vaccine manufacturer in the Southern Hemisphere, we are working closely with public health authorities and the Australian Department of Health to develop and license a safe and effective prototype vaccine in Australia as soon as possible. In developing the H5N1 vaccine, we have used technologies that we are confident can reliably be reproduced in large quantities, should a crisis occur. Early in 2006, we completed our first human clinical trial and in the second half of this year we will be exploring responses to higher doses of antigen in a broader age group.

Adjuvants are used to enhance or modify the human immune response to antigens in vaccines. Following some years of R&D investment in CSL’s proprietary ISCOMATRIX® adjuvant, we are now pleased to be moving the technology into a larger scale manufacturing environment at our Kankakee site in the US. This adjuvant will be used by US-based licensees including Merck in their development of a new generation of human vaccines. We plan to produce commercial quantities of GMP-quality adjuvant at both our US and Australian manufacturing sites.

Consistent with our long-term manufacturing of polyclonal immunoglobulin purified from human plasma, CSL has a significant interest in developing biotechnology products based on recombinant monoclonal antibody (MAb) technology. The academic scientific base to support the discovery of these MAb candidates is strong in Australia. We are investing in relationships, skills, facilities and intellectual property that will enable us to develop our lead antibody candidate, a drug potentially to treat leukaemia, as well as a growing portfolio of exciting preclinical candidate molecules.

Consistent with this strategy, the Company has announced a proposal to acquire 100% of the issued shares in Zenyth Therapeutics Ltd to be implemented by way of a Scheme of Arrangement. Our proposal was unanimously recommended by Zenyth Directors in the absence of a superior proposal from a third party. If the proposal is approved by Zenyth shareholders and the Supreme Court of Victoria, we look forward to combining Zenyth’s portfolio of pre-clinical R&D projects with CSL’s R&D portfolio and using our complementary skills to enhance our scientific capabilities.

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