British Biotech plc AGM Update.

Business Editors/Health/Medical Writers

LONDON--(BUSINESS WIRE)--Oct. 1, 2003

British Biotech plc (NASDAQ:BBIOY) (today to be renamed Vernalis plc, subject to shareholder approval) has been transformed during 2003 through two substantial mergers, and the Company is continuing to achieve further advances through important pipeline progress and extensive post-merger restructuring.

The first merger with the privately held company RiboTargets Holdings plc was completed in April 2003 and brought a high quality, structure-based drug discovery capability focused on novel cancer targets. The second merger with Vernalis Group plc was completed in September 2003 and brought a marketed product, frovatriptan, a clinical portfolio and innovative discovery programs focused on central nervous system disorders. The integration of British Biotech and RiboTargets has been fully completed, and the integration of Vernalis is progressing ahead of schedule.

The Company's sustained progress will be presented to shareholders at today's AGM.

Presentation highlights will include:

-- Continued growth of frovatriptan sales in North America and

Europe, with total prescriptions in North America up 23% in

the latest quarter;

-- A stringent review of the Company's combined post-merger R&D

portfolio in order to focus future investment on the most

competitive opportunities, encompassing four products in full

development and five late research programs, two of which are

funded by partners;

-- Continuing advances with priority pipeline products

-- Initiation of a second Phase IIIb study with frovatriptan

to support the successful menstrually associated migraine

trial completed in April 2003

-- Start of Phase I studies with R140, a new treatment for

cancer pain

-- Entry into Phase I expected this year for VR2006, a novel

treatment for Parkinson's disease 

-- Substantial progress in the integration of the three merged

companies. Significant cost synergies have been identified,

and are expected to amount in total to GBP13m p.a., when

implemented by Q1 2004, fully achieving initial estimates.

Simon Sturge, Chief Executive Officer, said:

"Following the transforming mergers of 2003, the Company is continuing to increase shareholder value by focusing on its most competitive R&D pipeline products and substantially reducing its cost base."

Further details:

I - Frovatriptan sales

Frovatriptan is approved and marketed in the US and Europe for the acute treatment of migraine. Just over one year after launch in the US, sales of frovatriptan had reached 3.2% of the oral triptan migraine market, and are continuing to grow with total prescriptions in North America of frovatriptan up by 23% in the latest quarter. Prescriptions are being driven by hospital specialists where the product now has a 7% market share. Repeat prescriptions have risen to 46% which is a good indicator of patient satisfaction. Ten months after launch in Germany, the first European territory, ex-pharmacy sales of frovatriptan had amounted to 6.4% of the oral triptan market. The Company is receiving a growing royalty income derived from the US and European sales.

II - Portfolio review and R&D pipeline

R&D investment will be primarily focused in the fields of central nervous system disorders (including obesity-related targets) and in cancer. In addition a novel product for the treatment of thrombotic disorders will continue in development.

The key priority programs are as follows:

(i) Development pipeline

-- Frovatriptan for prophylaxis of menstrually associated

migraine

In April 2003 an initial clinical study demonstrated the efficacy of frovatriptan as a preventive treatment for menstrually associated migraine, which affects around 50% of all women who suffer migraine. The improvement in headache-free rates was highly statistically significant for both the studied dose regimens of frovatriptan compared to placebo (p less than 0.0001).

Following discussion with regulatory authorities a long-term safety study and a further Phase IIIb efficacy study are being undertaken to support the extension of the existing frovatriptan label to this indication. If the positive initial results are confirmed, these studies will lead to regulatory submissions in the US and Europe in H1 2005.

-- BB-10153

This novel recombinant thrombolytic protein, which is being developed to treat thrombotic disorders, is expected to be targeted at peripheral arterial occlusion and stroke. It is currently being evaluated in a Phase IIa ascending dose study in patients who have suffered acute myocardial infarction, in order to establish proof-of-concept, i.e. that it can dissolve clots and restore coronary blood flow. It is expected that interim data from this study will be reviewed at the end of the year. If these data are positive, a partner will be sought for further development.

-- R140

R140 is a GABAA agonist targeting the treatment of pain in cancer patients. It entered a Phase I clinical program in September 2003 to evaluate its safety and pharmacokinetic properties in single and multiple dose studies. These studies are expected to be completed in late 2004.

-- VR2006

This adenosine A2A receptor antagonist is being developed as a potential novel treatment for Parkinson's disease. It is expected to possess advantages over current dopaminergic treatments. Preclinical studies with this product candidate are largely completed, and Phase I clinical studies will be started by December 2003.

(ii) Research programs

-- 5HT2c agonists

Highly selective 5HT2c receptor agonists are being evaluated as novel treatments for obesity, in a research collaboration with Roche under an agreement that concludes in February 2004. The collaboration aims to identify a development candidate to progress to clinical studies, which would be undertaken by Roche.

-- A2A antagonists 

A program is under way to identify and evaluate potent selective A2A receptor antagonists for the treatment of depression. It is expected that a development candidate will be selected during 2004. Discussions are currently being held with a number of companies interested in collaborating in this program. Such collaborations would also be likely to encompass the development of VR2006 in both Parkinson's disease and depression.

-- Hsp90 inhibitors

This novel drug target is a molecular chaperone, inhibition of which is believed to have significant potential in the treatment of a broad range of cancers. This program is utilizing state-of-the-art structure-based design technology to identify highly potent and specific inhibitors, with the aim of selecting a preclinical development candidate during 2004. Discussions are ongoing with several major pharmaceutical companies with the aim of establishing an R&D collaboration for this program.

-- Metalloenzyme inhibitors

This collaboration with Serono is a research program focused upon identifying selective inhibitors of certain metalloenzymes for the treatment of inflammatory/immune disorders, including multiple sclerosis. Serono has informed the Company that it is in the process of selecting a number of candidates for further development. In this event, Serono will undertake the further development of these compounds, with the Company receiving milestone and royalty payments.

-- CB1 antagonists

Selective cannabinoid CB1 receptor antagonists are being evaluated as novel treatments for obesity. They also have potential in other clinical indications including smoking cessation. The program aims to identify a development candidate during 2004.

(iii) Other programs

-- An initial Phase IIa study with the product VML670 in

treatment-emergent sexual dysfunction met some secondary

end-points but failed to meet its primary end-point. These

data have been provided for review to Eli Lilly & Company

which has the option to further develop this product. The

Company will not undertake any additional development.

-- Following completion of our portfolio review, it is our

intention to discuss with ImmunoGen and MethylGene our

collaborations on BB-10901 and MG98 respectively.

-- The Company's peptide deformylase inhibitor program in the

antibiotic field has been out-licensed in its entirety to

GeneSoft. GeneSoft will conduct all further research and

development with the Company receiving milestone and royalty

payments.

III - Integration and restructuring of the merged companies

The integration of British Biotech and RiboTargets was completed on schedule and the cost synergies predicted at the time of the merger have been achieved. Detailed plans for the integration of Vernalis are currently being implemented.

The combined headcount of the three companies which amounted to 271, will be reduced to approximately 135 when the restructuring is completed. An initial reduction of 67 was implemented, linked to the integration of British Biotech and RiboTargets, and headcount will be reduced by a further 70 positions, approximately, during the integration of British Biotech and Vernalis. Most of the reductions will take place in late 2003 and the integration is expected to be completed during Q1 2004.

As previously announced, the Company also plans to close its Oxford facility in early Q4 2003, and then divest it.

Total cost savings identified from the two mergers will amount to approximately GBP13m p.a., following their implementation, and it is anticipated that these will be fully achieved.

As a result of the change of control of Vernalis Group plc, Roche became entitled to repayment of a GBP7m convertible loan made to Vernalis Group plc in May 2002. The Company expects to repay this in the near future. Roche remains an important partner of the Company in relation to the 5HT2c agonist program summarised above.

Conclusion

During this year the Company has achieved a major transformation of its structure and business. It now has a highly focused development pipeline, which it aims to strengthen through further M&A activity. It also has a promising and innovative portfolio of research programs. Importantly, it has acquired a growing revenue stream through sales of its marketed product, frovatriptan.

The Company has been very aggressive in the restructuring of its cost base, and expects to achieve the targeted cost reductions somewhat ahead of schedule. In order to manage further its cash position, the Company will generally seek collaborative partnerships for its products in development, and for some of its later stage research programs.

This announcement contains certain statements that are or may be forward-looking with respect to the financial condition, results of operations and business achievements/performance of British Biotech. In particular certain statements with regard to the conduct of clinical trials and other development products and the integration of Vernalis' operations into British Biotech including the ability to generate cost synergies and the timing of integration benefits, are all forward-looking in nature. By their nature forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. The following factors, although not exhaustive, could cause actual results to differ materially from those the Company expects: unanticipated difficulties in the design or implementation of clinical trials, studies and investigations, results from clinical trials, studies and investigations that are inconsistent with previous results and the Company's expectations and the failure of the Company's development, manufacturing and marketing partners to perform their contractual obligations.