...3. Background to the merger
British Biotech and RiboTargets are committed to creating value for
shareholders by building a broader portfolio of discovery projects and
clinical products, both internally and through the acquisition of, or
merger with, other companies.
The Directors believe that the following factors arising from the
combination of British Biotech and RiboTargets will create benefits for
shareholders:
• The combination of RiboTargets' structure-based drug discovery capability,
designed to shorten the time taken in the discovery phase, with British
Biotech's complementary drug development expertise. The Merged Group will
aim to produce at least one pre-clinical development candidate each year
creating an increased flow of drug development candidates, and thus an
improved risk and reward profile
• Resources will be refocused on the most commercially attractive projects
within the Merged Group. There is significant potential to re-engineer and
rationalise the operations of the Merged Group. Over time the Merged Group
aims to reduce headcount to approximately 110 employees
• As part of this refocusing and as announced separately today, British
Biotech has agreed to transfer 17 employees currently involved in its
research into metalloenzyme inhibitors to Evotec OAI Limited (a subsidiary
of Evotec OAI A.G.). Certain services will be contracted back from Evotec
OAI Limited to enable British Biotech to progress its research into
anti-inflammatory and anti-infective disease under its collaborations with
Serono S.A. and GeneSoft Inc. respectively. This transfer will enable
British Biotech to move ahead with the rationalisation of its facilities in
Oxford and concentrate the research activities of the Merged Group in
Cambridge
• The various cost saving measures are expected to reduce cash outflow of
the Merged Group after costs by approximately £3.1 million in the 12 months
to 30 April 2004 and by approximately £6.4 million per annum thereafter
• The Merged Group will have a stronger financial position. As at 28
February 2003 (the latest practicable date prior to the date of this
announcement) British Biotech had Net Cash of £32.4 million, and RiboTargets
had Net Cash of £11.1 million plus a further £7.9 million to be received
from certain RiboTargets Shareholders upon completion of the Merger. This
will allow the Merged Group, post portfolio review, to fund the development
of selected product candidates to later stages before out-licensing and thus
retain more of the potential commercial value
• In addition, as a result of its greater size, financial resources, drug
development capabilities and strong management team, the Merged Group will
be better placed to participate in the further consolidation of the
biotechnology sector.
It is intended that the name of British Biotech will be changed in due
course.
4. Information on British Biotech
British Biotech's strategy to build shareholder value is to acquire and
exploit development and commercialisation rights over a broad portfolio
of specialist drugs targeted at diseases with limited treatment options.
British Biotech seeks to build its product portfolio through
collaboration with third parties and through its own research. A
multidisciplinary team, comprising representatives from across the
business, is focused on finding opportunities to broaden the portfolio
from external sources. British Biotech seeks to collaborate with
licensing partners to share the risks and rewards of drug development
and commercialisation, retaining commercialisation rights for niche
markets where appropriate.
British Biotech also seeks to build shareholder value by expanding its
in-house portfolio of research and development projects through organic
growth, mergers and acquisitions. This strategy will seek to optimise
the balance of risk, reward and timing for sustained delivery of
therapeutic drugs to key markets. The search for partners has targeted
the consolidation and strengthening of core research and development
skills. Success in this goal is intended to establish a strong platform
from which to capitalise on other opportunities in Europe and the US.
British Biotech currently has four drugs in active clinical development.
Two of these products are for certain types of cancer, one is for acute
thrombotic diseases and one is for community acquired pneumonia. In
research, British Biotech is engaged in progressing metalloenzyme
inhibitors (MEIs) as new treatments in several disease areas and in
running MEI projects in collaboration with Serono S.A. for serious
inflammatory disease and with GeneSoft Inc., for bacterial infection.
British Biotech has also entered into an agreement with the Defence,
Science and Technology Laboratory (DSTL) of Porton Down, UK, to
investigate the utility of selected British Biotech metalloenzyme
inhibitors against anthrax lethal toxin and botulin toxin.
British Biotech possesses a development capability covering all phases
of drug development from initial pre-clinical studies through to
registration. British Biotech has considerable scientific and clinical
experience in cancer and scientific experience in anti-infectives.
Certain aspects of development are contracted in from third parties. The
Company's development capabilities create opportunities for British
Biotech to enter into development partnerships with biotechnology and
pharmaceutical companies and enable British Biotech to undertake
clinical development of products independently in both Europe and the
USA when large clinical trials are not required. As a result, British
Biotech can retain commercialisation rights to these products and defer
seeking collaborations until later in the product development cycle.
British Biotech's continuing revenues have been derived primarily from
licensing and collaborative research and development agreements. To the
extent that research and development is not covered by these agreements,
it is funded from British Biotech's own resources. In addition, British
Biotech has earned interest income on its cash balances.
For the year ended 30 April 2002, British Biotech reported a loss before
taxation of £18.8 million on turnover of £1.5 million. British Biotech
had net assets as at that date of £54.9 million, with Net Cash of £48.3
million. For the half-year ended 31 October 2002, British Biotech
reported a loss before taxation of £8.9 million on a turnover of £0.7
million. British Biotech had net assets as at that date of £46.3
million, with Net Cash of £40.9 million. On the basis of the closing
price of an Existing Ordinary Share on 19 March 2003 (the last
practicable date prior to the date of the announcement of the Merger),
British Biotech's market capitalisation was approximately £26 million.
5. Information on RiboTargets
RiboTargets, founded in 1997, is a privately owned biotechnology company
that is engaged in the discovery and development of small molecule
therapeutics. RiboTargets uses structure-based drug design technologies
to identify and progress compounds and currently has one programme in
pre-clinical development, a second programme in lead optimisation and
five in early stage research. Initially, RiboTargets used its technology
platform to target key RNA structural motifs associated with infectious
disease. Its research and development is also now focused on protein
targets for new cancer therapies and anti-infective therapies.
RiboTargets has created its technology platform by integrating a number
of medicinal chemistry, crystallography, molecular modelling and NMR
spectroscopy approaches. This platform includes proprietary tools and is
proving effective in both the hit identification and lead optimisation
phases of drug discovery. Specifically, the proprietary tools include
'rCat' a searchable catalogue of over 3.4 million research compounds, of
which approximately 1.2 million are exclusively accessible to
RiboTargets, 'rDock' a virtual screening capability to filter libraries
of over a million compounds to identify a small, enriched subset for
laboratory testing and 'SeeDs,' a means of generating new lead molecules
from small, weakly-acting building blocks. The latter approach removes
the need to have active, pre-existing hit molecules in a screening
library at the start of a drug discovery programme and can also be used
to replace problematic parts of lead molecules during lead optimisation.
These capabilities, combined with a detailed understanding of the
interactions between the selected drug targets and small molecules at
the atomic level and of the potential drug-like properties of compounds
early in the process, are designed to accelerate the complex process of
drug discovery. The aim is to shorten the time taken in the drug
discovery phase by providing better and more informative start points.
RiboTargets' focus is on the discovery and development of small molecule
therapeutics addressing areas of high medical need in infection and
cancer treatment. RiboTargets' aim is to form partnerships and license
out some or all of the development products to other pharmaceutical and
biotech companies in exchange for milestone payments and future
royalties.
RiboTargets' two most advanced programmes are in the area of treatment
of cancer patients. R140 is an oral GABA(A) agonist for the relief of pain
in cancer patients, and is scheduled for formal entry into clinical
development in the second half of 2003. Indications of efficacy have
been observed in nine patients who received a single dose of R140 after
orthopaedic knee surgery. This pilot study was conducted in Australia
under the Clinical Trials Notification (CTN) Scheme. The second
programme is scheduled for pre-clinical development in the second half
of 2003. The aim of this programme is to develop a synthetic, small
molecule inhibitor of Hsp90, a drug target predicted to have relevance
to a broad range of cancer types. In addition to these programmes,
RiboTargets has initiated a further five early stage programmes
encompassing both anti-bacterial and anti-cancer drug targets.
RiboTargets has established a portfolio of small molecule therapeutic
research and development programmes and, where appropriate, has
augmented its own research capabilities with collaborative programmes
and in-licensing opportunities.
For the year ended 31 December 2002, RiboTargets reported a loss before
taxation of £8.8 million on turnover of £2.7 million. RiboTargets had
net assets as at that date of £4.4 million, with Net Cash of £2.9
million.
6. Current trading and prospects for the merged group
British Biotech's current trading
Since 31 October 2002, with the exception of two non-recurring expense
items totalling £0.7 million, progress has been in accordance with the
expectation of British Biotech management. In line with the predicted
product milestones, BB-10901 moved into Phase II development in December
2002 and the Phase I trial for MG98 in solid tumours commenced in the UK
in January 2003. The two other development projects, BB-10153 and
BB-83698, continue to progress in Phase II and Phase I trials
respectively. The research projects with Serono S.A. and GeneSoft Inc.
continue to progress in line with the plans for these projects.
RiboTargets' current trading
Progress since 31 December 2002 has been in line with the expectations
of RiboTargets' management. In January and February 2003, RiboTargets
received approximately £10.1 million pursuant to investments by certain
of the RiboTargets Shareholders. Subject to the Merger becoming
unconditional, certain RiboTargets Shareholders have agreed to invest a
further £7.9 million at completion of the Merger.
Prospects for the Merged Group
Following the progress noted above with BB-10901 and MG98, the Merged
Group will have two products in Phase II (BB-10153 and BB-10901) and two
products in Phase I trials (MG98 and BB-83698).
As a consequence of combining RiboTargets' competitive structure-based
drug discovery capability, designed to shorten the discovery process,
with British Biotech's complementary drug development expertise, the
Merged Group will aim to produce at least one development candidate each
year creating an increased flow of drug development candidates, and thus
an improved risk and reward profile.
The Merged Group will have a stronger financial position. As at 28
February 2003 (the latest practicable date prior to the date of this
document) British Biotech had Net Cash of £32.4 million, and RiboTargets
had Net Cash of £11.1 million plus a further £7.9 million to be received
from certain RiboTargets Shareholders upon completion of the Merger.
This will allow the Merged Group, post portfolio review, to fund the
development of selected product candidates to later stages and thus
retain more of the potential commercial value.
Resources will be refocused on the most commercially attractive projects
within the Merged Group. There is significant potential to re-engineer
and rationalise the operations of the Merged Group. Including the
effects of the transfer of certain employees to Evotec OAI Limited, and
the contracting back of certain services from that company (as described
in paragraph 3 above) these measures are expected to reduce cash outflow
of the Merged Group after costs by approximately £3.1 million in the 12
months to 30 April 2004 and by approximately £6.4 million per annum
thereafter.
British Biotech has articulated a strategy to create value for
shareholders by building a broader portfolio of discovery projects and
clinical products, both internally and through the acquisition of, or
merger with, other companies. The Directors believe in the benefits
created for shareholders by the combination with RiboTargets and are
confident of the prospects of the Merged Group.
7. The Merged Group's products
The Merged Group will have two product candidates in Phase II, two in
Phase I, one in pre-clinical development, and eight programmes in early
research. The Merged Group will seek to involve corporate partners for
late-stage development and commercialisation of its products.
The products in the Merged Group's development pipeline, before
portfolio review, are as follows:
Product Description Partner Status Indication
BB-10153 Novel thrombolytic - Ph II Acute thrombotic
diseases
BB-10901 Targeted cytotoxic ImmunoGen PhI/II Small cell lung cancer
BB-83698 Peptide deformylase GeneSoft Ph I Community acquired
inhibitor pneumonia
MG98 Anti-sense DNA MethylGene Ph I Solid tumours/AML
R140 Non-sedative - Pre-clinical Severe pain
analgesic
Hsp90 Inhibitor - Late research Cancer
PDF inhibitor GeneSoft Late research Respiratory tract
infections
8. Board of directors
The board of British Biotech following the Merger will be drawn from the
boards of both British Biotech and RiboTargets. The proposed members of
the Merged Group's board are:
Dr Peter Fellner Chairman (with executive responsibilities)
Simon Sturge Chief Executive
Anthony Weir Finance Director
Tim Edwards Corporate Development Director
Keith Merrifield Non-executive Director
Gene Williams Non-executive Director
Ian Kent Non-executive Director
On completion of the Merger, all of the directors of RiboTargets other
than Simon Sturge will be standing down as directors of RiboTargets, but
Simon Sturge and Ian Kent will join the British Biotech Board. In
addition, Philip Rogerson will be standing down as a non-executive
director of British Biotech.
Following completion of the Merger and subject to stepping down from his
executive responsibilities at Celltech Group plc, Peter Fellner will
assume some executive responsibilities as Chairman of British Biotech.
In his role as Chairman, Peter Fellner will have responsibility for
looking at and evaluating future opportunities for the Company. Simon
Sturge will be responsible for running the Company and setting (by
agreement with the Chairman) and implementing corporate strategy....
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