BRITISH BIOTECH'S SIX-MONTH LOSS DECREASED TO US$12.2M.

British Biotech (LSE:BBG)(Nasdaq:BBIOY), Oxford, England, has announced its interim results for the six months ended October 31, 2001. Highlights of the period include the following:

-- Patient studies initiated with three products

-- Phase I for BB-10901 in small cell lung cancer 

-- Phase II for E21R in acute myeloid leukemia 

-- Registry study for the Batimastat BiodivYsio(R) stent in restenosis

-- Manufacturing under way for a phase II study of the novel thrombolytic, BB-10153

-- Restructuring completed, non-core assets sold

-- Loss for the half year of (pound)8.4 million (US$12.2 million) (2000: (pound)12.2 million)

-- Substantially reduced cash burn for the half year of (pound)2.8 million (US$4.1 million) (2000: (pound)14.0 million)

-- Cash balance at October 31, 2001 of (pound)62.2 million (US$90.2 million)

Dr Elliot Goldstein, CEO of British Biotech, said: "The turnaround at British Biotech continues to make good progress. We have had a productive half-year in which three products started clinical studies and a major restructuring of the business was completed. Over the next 12 months we look forward to generating the critical proof of principle data from our existing products and substantially expanding the Product Portfolio."

Interim Results for the six months ended October 31, 2001

In the half-year to October 31, 2001 British Biotech, in collaboration with its partners, has continued to develop its Product Portfolio. During the period, patient studies were started with three products.

In August, management implemented a major restructuring to intensify the focus on drug development, add to cash resources and significantly reduce fixed infrastructure costs through the transfer of part of British Biotech's pre-clinical research operations to OSI Pharmaceuticals, Inc (OSI). Together with the sale and leaseback of offices and laboratories in April 2001, this transaction completed the sale of non-core assets, in total raising (pound)20 million (US$29.0 million) in calendar year 2001. Following the restructuring British Biotech has 86 full-time employees.

Product Portfolio

BB-10901 (Collaboration with ImmunoGen, Inc, USA)

Patient recruitment in the phase I/II dose-ranging study in small cell lung cancer commenced in June 2001 at two centers in Texas and is progressing well. Testing has been completed at dose levels of 5, 10 and 20 mg/m2 without dose-limiting toxicity; treatment at the fourth dose level of 40mg/ m2 is now under way.

Next milestone: escalate to maximum tolerated dose; start phase II segment of study - Q2 2002

E21R (Collaboration with BresaGen Ltd, Australia)

A phase II study of E21R in patients with acute myeloid leukemia was initiated in August 2001. Five patients have now received E21R and recruitment of suitable patients is continuing at four UK hospitals. Further sites in Europe are being evaluated for expansion of this trial. In addition, BresaGen is continuing to recruit patients for a phase II study of E21R in chronic myelomonocytic leukemia.

Next milestone: phase II results - Q4 2002

Batimastat BiodivYsio(R)stent (Collaboration with Biocompatibles International plc, UK)

The first patient trial of the batimastat-coated BiodivYsio(R) vascular stent started in August 2001. The purpose of this multi-center European study is to determine the safety and efficacy of the stent and full recruitment of 150 patients into the study was completed in November. A European pivotal study is scheduled to start in December 2001, with a second pivotal study planned to start in the USA in the first half of 2002.

Next milestones: start EU pivotal study - Q4 2001; start US pivotal study - Q2 2002

BB-10153

Manufacture of BB-10153 for a phase II proof of principle study is progressing to plan at DSM Biologics in Canada. The first of four batches of the product has been prepared and is undergoing release testing. Meetings with external experts and regulators have been held to review the clinical development plan for this novel thrombolytic. An Investigational New Drug (IND) application is planned for early 2002.

Next milestone: file IND, start phase II - Q1 2002

Research

British Biotech's research concentrates on new approaches to serious inflammatory disease and the discovery of new classes of antibiotics. Research into inflammatory disease, conducted in collaboration with Serono SA, Europe's largest biotechnology company, is progressing well.

British Biotech's in-house research into new classes of drugs that will overcome the serious problem of antibiotic resistance has also made good progress. In pre-clinical studies the Antibiotic Program's lead compounds, peptide deformylase (PDF) inhibitors, have shown high potency against gram positive bacteria, in particular drug-resistant strains of Streptococcus pneumoniae. The company aims to initiate clinical studies with the program's lead compound in 2002 and talks are in progress with other companies to form an R&D collaboration for this program.

Next milestones: secure collaboration; start phase I study with lead antibiotic - 2002

Financial Review

Profit and loss account

The loss for the six months ended October 31, 2001 decreased to (pound)8.4 million (US$12.2 million) (2000: (pound)12.2 million). Turnover in the half year was (pound)0.7 million (US$1.0 million) (2000: (pound)0.1 million) and resulted from recognition of a proportion of the US$5 million received from Serono in November 2000. Research and development expenditure was lower at (pound)10.8 million (US$15.7 million) (2000: (pound)12.2 million) due to lower levels of infrastructure resulting from cost-reduction initiatives. Administrative expenditure increased to (pound)2.3 million (US$3.3 million) (2000: (pound)1.9 million) due to reorganization costs. Profit on disposal of fixed assets was (pound)1.9 million (US$2.8 million) (2000: (pound)nil) and arose on the transfer of certain pre-clinical operations to OSI. Research and development tax credits of (pound)0.7 million (US$1.0 million) (2000: (pound)nil) were recognized as the company believes it will satisfy the requirements of the Finance Act 2000 in the year ending April 30, 2002.

Cash flow

Cash and short-term deposits at October 31, 2001 were (pound)62.2 million (US$90.2 million), compared with (pound)65.0 million at April 30, 2001 and (pound)61.7 million (US$89.5 million) at October 31, 2000. The net cash outflow in the half-year of (pound)2.8 million (US$4.1 million) benefited from the receipt of (pound)8.2 million (US$11.9 million) from OSI. Excluding this receipt, the cash outflow in the half-year was reduced to (pound)11.0 million (US$16.0 million) (2000: (pound)14.0 million). The reduction was due to the lower loss for the period and the payment last year of $1.5 million to ImmunoGen to acquire the rights to BB-10901.

Outlook

British Biotech's key objectives for 2002 are as follows:

-- progress the Product Portfolio to generate key proof of principle data;

-- acquire commercialization rights to at least one new drug in clinical development;

-- form a research and development collaboration for the Antibiotic program; and

-- start clinical trials of lead antibiotic.

The Board is also evaluating other opportunities to expand significantly the Product Portfolio. British Biotech is particularly well placed in this respect, due to the company's expertise in drug development, proven track record in collaborating to acquire new drug opportunities, strong cash position and strategically advantageous position in Europe. British Biotech will actively pursue alliances and corporate transactions to achieve this objective.

For more information, visit http://www.britishbiotech.com or call 212/696-5600.