Chief executive David Thatcher said that the result was 'well below expectations,' and reflected delays in various manufacturing programmes, reduced levels of repeat business and aggressive competition in the DNA market in the US.
DNA made up the bulk of Cobra's sales in 2003, but revenues in this category fell by 73 per cent in the first half. The reason? More than two thirds of the company's DNA output was going to organisations developing DNA vaccines, a technology that has failed to live up to its early promise.
"The efficacy of this approach has not yet been proven convincingly in the clinic, and a number of customers are delaying programmes as they wait for more compelling preclinical data before moving onto full-scale manufacture," said Thatcher.
Peter Coleman, the company's finance director, told In-Pharmatechnologist.com that the bulk of the DNA revenues in 2003 had been accounted for by contracts to supply HIV vaccines for the International AIDS Vaccine Initiative (IAVI) and the South Africa AIDS Vaccine Initiative (SAAVI).
The IAVI trial has now come to a close and is being analysed, while the SAAVI trial is still ongoing but is largely supplied with vaccine. The completion of these contracts held back DNA sales to just 34 per cent of total revenues in the first half, with little sign of an improvement in the medium term.
"There's not a lot of DNA in the forward order book," said Coleman.
Cobra has doubled its capacity in protein and virus manufacturing, through the acquisition last year of a new facility in Oxford to complement its existing production site in Keele, and said earlier this year that this should mitigate the delays to the DNA contracts in the second half.
Viruses are the main focus for Cobra at present, making up 37 per cent of revenues in the first half as contracts came in from the likes of Oxford Biomedica and Oncolytics. Coleman said that the additional capacity is sufficient to allow Cobra to become the world's largest contract virus manufacturer.
However, perhaps mindful of the fact that viruses could prove to be a short-lived opportunity in the same was as DNA, the company is also expanding into the large protein production market, accounting for 21 per cent of revenues in the first half.
Its only major contract in this segment - a UK clinical programme - has been delayed, cutting into the firm's first-half protein revenues. This disappointment has been offset by a March agreement with Avidex for the manufacture of T cell receptor products.
"Our microbial production capacity can be switched between DNA and protein projects," said Coleman, noting that proteins will be a key element in a renewed push into the US market, where Cobra is already well-established as a DNA player.
The importance of the US to the company has been reinforced by the appointment of a commercial director, Mark Corbeau, who will be based in Boston. One of his primary functions will be to highlight Cobra's capabilities in virus, protein and cell manufacture.
In the latter area - an emerging market for therapeutics - Cobra has contracts with Advaxis for a programme tackling the food poisoning bacteria Listeria monocytogenes and with Germany's Ludwig Institute for Cancer Research.
The company has also developed its own product development platform called ORT-VAC, which can generate genetically engineered oral vaccines. This technology is undergoing testing at the UK's Defense Science and Technology Laboratory in Porton Down, and could be ready for licensing in 2005.