http://biz.yahoo.com/rf/010726/l26166153.html

Thursday July 26, 5:38 am Eastern Time
By Ben Hirschler, European Pharmaceuticals Correspondent

LONDON, July 26 (Reuters) - British Biotech Plc (quote from Yahoo! UK & Ireland: BBG.L) said on Thursday it had dropped two drugs from its portfolio following development setbacks, but was starting a Phase II clinical trial of another medicine against leukaemia.

The firm -- which nearly entered the FTSE 100 index in 1997 before falling from grace when its leading cancer drug failed to meet expectations -- reported a loss in the year to April 30 of 23.4 million pounds ($33.4 million) against 25.4 million in 2000.

The annual cash burn rate was reduced to 10.7 million pounds from 22.2 million, following the sale of the company's building outside Oxford, leaving cash reserves of 65 million pounds at the year-end, broadly in line with analyst expectations.

After the torrid times of the late 1990s, British Biotech is trying to reinvent itself under new Chief Executive Elliott Goldstein by developing a new portfolio of drugs, plus an early-stage antibiotic programme.

However, two products which were being developed under a collaboration deal with Swiss biotech group Serono SA have now been dropped, following problems in development.

The biggest loss was the failure of BB-2827, a product against rheumatoid arthritis which had already entered human trials, but was found to have serious side effects. The other casualty was BB-76163, for multiple sclerosis, which failed to prove effective in pre-clinical tests.

Despite this, Goldstein said the research project with Serono on using metalloenzyme inhibitors to fight inflammatory diseases was far from dead.

"Obviously those two products are not moving forward but the research collaboration that is looking at dozens at different compounds in various models is active and progressing well," he told Reuters.
 

MARKET TAKES NEWS IN STRIDE

The stock market took the two product failures in its stride with British Biotech shares -- which have been bumping along near their lows for the past two years -- adding 1/2 pence to 20p by 0900 GMT in a steady market for European biotech stocks.

"It's never good to see drugs drop out of a pipeline but this is counter-balanced by the fact that other important programmes appear to be making progress," said Nick Woolf, biotech analyst at AB AMRO.

British Biotech said it would shortly commence intermediate Phase II studies E21R, a drug being developed with Australian biotechnology company BresaGen Ltd (Australia:BGN.AX - news) for acute myeloid leukaemia.

Among other projects, BB-10901 is continuing to progress through Phase I/II studies for small cell lung cancer and clinical trials on a stent coated with its drug batimastat are expected to commence shortly.

British Biotech is working on the latter project with Biocompatibles International Plc (quote from Yahoo! UK & Ireland: BII.L), which is developing a series of coated stents, tiny components designed to keep arteries open.

Goldstein said he hoped to license in one new middle- or late-stage compound this year and was also continuing discussions with companies interested in partnering the antibiotics programme.

British Biotech would be looking at further cost savings in the current financial year to help finance product development, Finance Director Tony Weir added.

"We are looking to sell some more non-core assets and raise cash...We are not going to save our way to success but what we are going to do is reduce our fixed expenditure and invest it sensibly in products," he said.