Avant Immunotherapeutics, Inc. has announced that GlaxoSmithKline (GSK) paid royalties on GSK's sales of Rotarix rotavirus vaccine in Australia and certain European countries at the lower of two royalty rates under their 1997 license agreement. GSK's decision to pay the lower royalty rate (which is 70 per cent of the full rate) is based upon GSK's assertion that Rotarix is not covered by the patents GSK licensed from Avant in Australia and these certain European countries. While GSK has shared with Avant the reasoning underlying its position in general terms, Avant continues to evaluate GSK's legal analysis underlying the assertion that its development of Rotarix takes the vaccine outside the scope of the claims of these licensed patents.

"We are presently analyzing various options to counter GSK's assertion and protect Avant's rights. Although we have sold the bulk of Avant's royalties from sales of Rotarix to Paul Royalty Fund II, L.P. and only retain a residual interest, we are of course disappointed in this news. We maintain an open channel with GSK, which has been one of Avant's long-standing strategic partners, and our advisors are hard at work evaluating what we have learned from GSK to date. At the same time, we are determined to take all available steps to enforce our rights under our license agreement with GSK, both regarding the recent sales in Australia and Europe and future sales in the other countries in which we hold patents," said Una S Ryan, PhD, Avant president and CEO.

In May 2005, Avant sold an interest in the royalties payable to Avant by GSK on worldwide sales of Rotarix to Paul Royalty Fund II, L.P for up to $61 million. To date, PRF has paid Avant $50 million. It is Avant's view that the $50 million already paid to Avant by PRF and the potential $11 million in additional milestone payments are not affected by this development.

If Avant is unable to reverse GSK's assertion that royalties are payable at the lower rate, the value of Avant's residual interest in Rotarix royalties under its agreement with PRF would be adversely affected. In light of GSK's position, the royalties to which PRF is entitled will no longer be limited by a $27.5 million annual threshold, which Avant projected may have been reached in later years as sales of Rotarix increase. Irrespective of GSK's position, Avant will still retain essentially all of the royalties on worldwide sales of Rotarix once PRF receives 2.45 times the aggregate cash payments it makes to Avant, though the amount of such residual royalties will be lower if GSK's position stands. Further information regarding the terms of Avant's sale of the rotarix royalty interest is available in its prior public announcements and securities filings.