Commercialising
`high-value
`technologies
`
`BTG plc Annual report and accounts
`for the year ended 31 March 2003
`
`BTG plc Annual report and accounts 2003
`
`Contact BTG at:
`
`BTG in Europe
`10 Fleet Place
`Limeburner Lane
`London
`EC4M 7SB
`UK
`
`BTG in North America
`Five Tower Bridge
`300 Barr Harbor Drive
`7th Floor
`West Conshohocken
`PA 19428-2998
`USA
`
`BTG in Japan
`7f Kato Building
`5-26-8 Shimbashi
`Minato-ku
`Tokyo 105-0004
`Japan
`
`In the UK and USA, BTG operates
`through wholly owned subsidiaries,
`BTG International Ltd and
`BTG International Inc, respectively.
`
`Tel: +44 (0)20 7575 0000
`Fax: +44 (0)20 7575 0010
`
`Tel: +1 610 278 1660
`Fax: +1 610 278 1605
`
`Tel: +81 (0)3 5777 6831
`Fax: +81 (0)3 5777 6835
`
`Visit our website to find out
`more about BTG:
`
`www.btgplc.com
`
`E-mail: info@btgplc.com
`
`JANSSEN EXHIBIT 2137
`Mylan v. Janssen IPR2016-01332
`
`

`

`1 Highlights
`2 The year in review
`4 Chairman’s statement
`5 Chief Executive Officer’s review
`8 Chief Operating Officer’s review
`15 Chief Financial Officer’s review
`18 Directors
`20 Advisers
`
`21 Directors’ report
`23 Corporate governance
`26 Directors’ remuneration report
`32 Statement of Directors’
`responsibilities
`33 Independent auditors’ report
`to the members of BTG plc
`34 Consolidated profit and
`loss account
`
`34 Consolidated statement of total
`recognised gains and losses
`35 Balance sheets
`36 Consolidated cash flow statement
`37 Notes to the accounts
`55 Five year financial record
`57 Shareholder information
`
`BTG is a leading technology
`commercialisation company.
`
`We find, develop and commercialise
`emerging technologies in the life
`and physical sciences. These
`innovations are protected by a strong
`portfolio of intellectual property.
`
`We create value by investing in
`further technical development,
`enhancing the scope and strength
`of the intellectual property and
`developing commercialisation plans.
`
`We capture value by licensing
`the rights to the technologies and
`by forming new business ventures
`around them.
`
`Shareholder information
`
`Financial calendar
`Annual General Meeting
`Preliminary announcement of interim results for the period
`November 2003
`ended 30 September 2003
`December 2003
`Circulation of interim report for the period ended 30 September 2003
`Preliminary announcement of annual results for the year ended 31 March 2004 May/June 2004
`Circulation of annual report for the year ended 31 March 2004
`June 2004
`
`23 July 2003
`
`Shareholders
`At 31 March 2003 there were 6,154 holders of ordinary shares in the Company. Their shareholdings are analysed as follows:
`
`Size of shareholding
`1 – 5,000
`5,001 – 50,000
`50,001 – 100,000
`100,001 – 500,000
`Over 500,000
`Total
`
`Shareholders are further analysed as follows:
`
`Type of owner
`Employee share schemes
`Employee shareholders
`
`Private shareholders
`Limited companies
`Bank and nominee companies
`Insurance companies and pension funds
`Other
`Total
`
`Number of
`shareholders
`5,575
`418
`50
`70
`41
`6,154
`
`Percentage of
`Number of
`total number of
`ordinary shares
`shareholders
`3,477,105
`90.6
`6,775,238
`6.8
`3,342,365
`0.8
`16,049,933
`1.1
`75,691,655
`0.7
`100.0 105,336,296
`
`Percentage of
`ordinary shares
`3.3
`6.4
`3.2
`15.2
`71.9
`100.0
`
`Number of
`shareholders
`2
`84
`86
`4,459
`58
`1,518
`9
`24
`6,154
`
`Percentage of
`Number of
`total number of
`ordinary shares
`shareholders
`2,029,897
`–
`1,305,251
`1.4
`3,335,148
`1.4
`5,573,370
`72.5
`3,837,211
`0.9
`91,560,307
`24.7
`298,903
`0.1
`731,357
`0.4
`100.0 105,336,296
`
`Percentage of
`ordinary shares
`2.0
`1.2
`3.2
`5.3
`3.6
`86.9
`0.3
`0.7
`100.0
`
`Shareholders holding their shares within PEPs and ISAs are included within ‘Bank and nominee companies’.
`
`Shareholder change of address
`As described in the accompanying Notice of Annual General Meeting, the Company offers the facility, in conjunction with
`Capita Registrars, to conduct a number of routine matters via the web, including the ability to notify any change of address. If you
`are a shareholder and are either unable or would prefer not to use this facility, please do not send the notification to the
`Company’s registered office. Please write direct to Capita Registrars, at their address shown below, where the register is held.
`
`Registered office and
`head office number
`BTG plc
`10 Fleet Place
`Limeburner Lane
`London
`EC4M 7SB
`Telephone: +44 (0)20 7575 0000
`Facsimile: +44 (0)20 7575 0010
`
`Registrars and transfer office
`Capita Registrars
`The Registry
`34 Beckenham Road
`Beckenham
`Kent
`BR3 4TU
`Telephone: +44 (0)870 162 3100
`
`Registered number
`2670500
`
`57 BTG plc Annual report and accounts 2003
`
`

`

`Highlights
`
`Total revenues
`Provensis development
`Loss before tax
`Net funds
`
`£ million
`Year ended
`31 March 2003
`31.5
`(13.6)
`(36.2)
`61.1
`
`£ million
`Year ended
`31 March 2002
`33.2
`(12.6)
`(22.6)
`97.5
`
`Revenue analysis
`2003 (£ million)
`
`Use of Rights Issue cash
`October 2000 – March 2003 (£ million)
`
`123 4
`
`5
`
`1 2 3 4
`
`1 Royalties from launched products
`2 Revenue from new agreements
`3 Milestone payments
`4 Audit revenues
`
`
`
`24.9
`3.9
`1.5
`1.2
`31.5
`
`1 Balance of net funds
`2 Development & purchase
` of new technology
`3 New ventures & strategic alliances
`4 Other (net of existing cash)
`5 Provensis
`
`
`
`61.1
`
`2.9
`14.8
`9.2
`34.0
`122.0
`
`Five-year revenue analysis
`(£ million)
`
`1999
`
`2000
`
`2001
`
`2002
`
`2003
`
`0
`
`10
`
`20
`
`30
`
`40
`
` Royalties
` Revenues from new
`
`agreements
` Milestone payments
` Audit & sale of patents
` Equity disposal
`
`1 BTG plc Annual report and accounts 2003
`
`

`

`July
`2002
`
`September
`2002
`
`November
`2002
`
`December
`2002
`
`Licence for new BSE test
`BTG licensed its enhanced
`chemiluminescence
`technology to a European
`company for use in a new,
`rapid method of testing cattle
`carcasses for BSE. The test kits
`are now being distributed
`worldwide by Abbott
`Diagnostics.
`
`Two-part hip cup patents
`licensed to Wright Medical
`The two-part hip cup is a
`prosthetic hip joint replacement
`that allows accurate positioning
`by the surgeon, helping to
`prevent hip joint dislocation.
`Since its invention, the
`technology has been fully
`adopted by the prosthetics
`industry and is a key component
`in approximately 90% of
`available products. In July, BTG
`licensed the two-part hip cup
`patents to Wright Medical
`Technology, Inc., a worldwide
`designer, manufacturer and
`distributor of orthopaedic
`implants and instruments. This
`is the eighth licence agreement
`signed for this technology.
`
`BTG invests in new cancer
`therapeutics company
`BTG has invested in Iclectus
`Ltd, a new biotechnology
`company that will focus on
`developing intrabody and
`masked antisense molecules
`as therapies for the treatment
`of cancer, and as tools for
`validating new drug targets.
`Its approach is to target
`specifically disease-causing
`entities within the cell. Iclectus
`has access to a portfolio of
`intellectual property licensed
`or optioned to the company
`by MRC-Technology, and will
`continue to collaborate with
`the MRC.
`
`Campath licences granted
`New Campath® (alemtuzumab)
`licences were granted during
`the year, including diagnostics
`rights, rights to distribute the
`product in the Far East and
`rights to all non-oncology
`indications, to ILEX Oncology,
`Inc. ILEX continued to make
`good progress in establishing
`Campath® as a treatment for
`chronic lymphocytic leukaemia,
`its approved indication, and in
`developing the product in other
`indications. A randomised, open
`label Phase II study began in
`December 2002, comparing
`the safety and efficacy of
`Campath® to Rebif (interferon
`beta-1a) in 150 patients with
`early, active relapsing-remitting
`multiple sclerosis.
`
`Theyear in
`review
`
`2 BTG plc Annual report and accounts 2003
`
`

`

`January
`2003
`
`February
`2003
`
`March
`2003
`
`March
`2003
`
`New company to develop
`treatments for ageing-
`related diseases
`BTG and Catalyst BioMedica
`Ltd invested £1.4 million in a
`new biotechnology company,
`Senexis Ltd, which is
`developing pharmaceuticals for
`the diagnosis and treatment of
`ageing-related diseases caused
`by amyloidosis – a common
`pathogenic process. Based at
`the University of Manchester
`Institute of Science and
`Technology, Senexis will focus
`on developing a novel class of
`potent inhibitors that can
`effectively block and reverse
`a key step in the process of
`protein/peptide aggregation,
`or amyloidosis.
`
`New licence for MLA
`BTG signed a second licence
`for the Microlithographic array
`(MLA) technology. Originally
`developed at Princeton
`University, this technology is
`used in biochemical analysis
`and offers a new approach to
`separating biomolecules such as
`DNA, RNA, proteins or even
`whole cells. Under the new
`licence, a US technology
`development company will
`develop diagnostics using MLA
`for pre-natal DNA screening.
`Under a licence signed earlier
`in the year, U.S.Genomics, Inc.
`will incorporate the MLA into
`their novel DNA analysis
`system, the GeneEngine™
`platform for ultra-rapid analysis.
`
`BTG to commercialise
`web navigational tracking
`patents
`Building on a strong track
`record of generating value from
`under-utilised corporate assets,
`BTG is to commercialise a
`portfolio of patents relating to
`web navigational tracking and
`online affiliate programmes.
`Originally developed by
`Infonautics, these patents are
`fundamental to one of the
`most successful e-commerce
`marketing tools – affiliate
`programmes, sometimes called
`pay-per-lead or pay-per-click
`programmes. They are used by
`more than 5,000 active online
`merchants worldwide.
`
`BTG completes staged
`investment in KetoCytonyx
`KetoCytonyx, Inc. was launched
`by BTG to develop treatments
`based on ketone bodies
`for acute and chronic
`neurodegenerative conditions.
`Having appointed the first
`members of the management
`team, developed plans to start
`clinical trials and initiated
`scale-up of materials for the
`trials, BTG has completed its
`staged investment of £3 million
`in the company. The first
`clinical study, in an indication
`that should allow rapid
`demonstration of proof of
`principle, is expected to
`commence this financial year.
`
`BTG’s revenue growth over the
`medium term will come from
`technologies already in the portfolio.
`Our activities this year show
`progress towards our medium-term
`goals and have laid the foundations
`for future growth.
`
`3 BTG plc Annual report and accounts 2003
`
`

`

`Chairman’s statement
`
`‘BTG is a clear world leader in technology
`commercialisation. By increasing our focus and
`reducing our cost base, we are on a solid footing
`to become a sustainable, profitable business.’
`
`from established products, and the down-
`payments and royalties we anticipate from
`technologies we expect to commercialise
`in the near future. Although less
`predictable, we also expect to earn
`revenues from other new business
`opportunities and technologies that are
`not yet in the commercialisation phase.
`Thus, even in this harsher economic
`climate, we are able to reconfirm our
`objective of achieving profitability by
`2006, excluding any impact from
`Provensis Ltd.
`
`Provensis currently represents both
`our biggest investment and greatest
`opportunity. We are very encouraged by
`the significant progress made this year,
`described in detail in the Chief Executive
`Officer’s review.
`
`Turnover for the year of £31.5 million
`was slightly ahead of the previous year.
`However, total revenues, in which we
`include equity realisations, were
`£1.6 million lower than in the previous
`year when we realised £2.3 million
`profit from the sale of an equity stake.
`Consequently, net revenues of
`£17.8 million were £2.1 million less than
`the previous year. Investment in Provensis
`development increased by £1.0 million to
`£13.6 million, and investment in other
`technology development almost doubled
`to £1.9 million this year compared
`with £1.0 million the previous year.
`Administrative costs, including a
`restructuring cost of £1.9 million, were
`slightly higher at £33.0 million. These,
`together with a higher than normal
`patent amortisation charge following
`December’s reorganisation, less net interest
`receivable and a write-down of equity
`investments, resulted in a loss before tax
`
`of £36.2 million (£22.6 million the
`previous year). The Board does not
`recommend payment of a dividend for
`the year.
`
`As stated last year, I will not stand for
`re-election at the Annual General Meeting
`on 23 July 2003. I am delighted to report
`that Sir Brian Fender, currently Senior
`Independent Director, will be appointed
`Chairman. In addition, Mrs Consuelo
`Brooke, who joined the Board 12 months
`ago, will be appointed Senior Independent
`Director. Mrs Brooke and Dr William
`Jenkins, who also joined the Board this
`year, have already contributed significantly
`to the Company’s development.
`
`I am grateful to my colleagues past and
`present on the Board, and to all of BTG’s
`former and current employees, for their
`contributions to making this business
`a clear world leader in technology
`commercialisation. The planned
`expansion of BTG’s business over the
`past years has of necessity been curtailed
`by the global downturn. Nonetheless,
`I firmly believe that we have continued to
`build value in the business. This, together
`with the recent changes we have made
`to increase our focus and reduce our
`cost base, places us on a solid footing to
`become a sustainable, profitable business.
`
`Dr Jack Leonard
`Chairman
`
`BTG’s business has been evolving during
`a period of significant change in the
`global economic and political climates.
`The impact of these changes has been
`felt strongly in the high tech and biotech
`sectors, where many established
`companies are struggling to grow and
`emerging companies are focused on
`surviving the downturn.
`
`As we have said previously, this presents us
`with as many opportunities as challenges.
`Our objective over the past year has been
`to balance the likelihood of having to ride
`out tough economic conditions over the
`next few years, while continuing to invest
`in major opportunities for creating future
`value. We have therefore restructured our
`business to concentrate our investment
`activities on a smaller number of high-
`value technology sectors. This has also
`enabled us to reduce our cost base, which
`is expected to fall by approximately
`£6.0 million this year.
`
`Our business model provides reasonable
`visibility for a significant proportion of
`the revenues we expect to generate over
`the medium term. These include the
`recurring royalty streams already flowing
`
`4 BTG plc Annual report and accounts 2003
`
`

`

`Chief Executive Officer’s review
`
`‘The success of BTG’s business depends
`on the performance of the technology
`portfolio as a whole. We anticipate further
`significant operational and financial
`progress this year.’
`
`common commercialisation routes are
`licensing the technology to an established
`industry player, and creating a venture that
`we will fund initially prior to attracting
`third party investment.
`
`Our business model is characterised by
`investment in the early years with value
`generation commencing from three to five
`years or even more. We create value in the
`intervening period by securing strong
`intellectual property protection, developing
`the technology and determining the
`optimum route for realising value. We then
`use our commercial skills to secure licences
`or create ventures. Most technologies will
`not make it all the way through, either
`because they do not perform as anticipated
`or because the market opportunity
`diminishes. Those that do make it must
`therefore generate sufficient returns to pay
`for the failures (although some individual
`technologies that fail still do make money
`for BTG from down-payments and
`milestone payments).
`
`The confidence to pursue our strategy
`stems from three drivers. Firstly,
`universities and companies more than ever
`need to create commercial returns from
`their research outputs. The availability to
`us of key technologies has not abated.
`Secondly, product innovation will continue
`to drive markets and economic growth.
`Finally, BTG’s role in this expanding
`market is bridging this gap, providing the
`patent, technical and commercial platforms
`for transforming scientific and technical
`ideas into market-leading products. We
`have the capabilities, resources and proven
`track record in commercialising
`technologies to take advantage of this
`increased market opportunity.
`
`What has changed is our technology focus,
`driven by changes in the marketplace.
`
`BTG’s marketplace
`In October 2000, we raised £122 million
`to expand the business so that we could
`address more opportunities across a broad
`range of technology sectors. At that time,
`most sectors were growing, there was
`significant investment flowing into
`established and new companies, and there
`was strong competition in industry to gain
`access to early stage technologies.
`
`Since then, there has been turmoil in the
`world’s economies. This has affected many
`of the market sectors in which we operate,
`but the impact has not been uniform and
`demand in some sectors, especially in life
`sciences, remains strong.
`
`We have a healthy flow of new
`technologies from universities and
`companies seeking to extract value from
`their assets. We have welcomed many new
`clients during the past year, including
`Georgetown University Medical Center
`and Washington University in St Louis in
`the US, and the University of Greenwich
`in the UK.
`
`In some high tech areas, such as telecoms
`and IT, investment in new product
`development has decreased significantly.
`The near-term prospects for BTG realising
`value from technologies addressing these
`markets have also reduced. We have been
`unable to commercialise some
`technologies, or to generate the value we
`once thought possible from others.
`
`We believe there will be a recovery in
`many sectors, but this will be a gradual
`process that takes place over several years.
`
`Increased focus
`We have been realistic and balanced the
`prospects for global recovery in the near
`term with our available resources. We have
`
`Our business is structured around five areas: ageing
`and neuroscience; biopharmaceuticals; oncology;
`semiconductors; and IP-driven opportunities outside
`the four target areas.
`
`In the first half of the year, we conducted
`a detailed review of our business that
`resulted in a significant restructuring of
`our operations. We made these changes
`to make sure that we can deliver on our
`commitment to shareholders to create a
`profitable, growing technology
`commercialisation business over the
`medium term. In this review I describe
`the progress we are making, with reference
`to the key areas that we addressed in our
`business review. I then provide an update
`on Provensis.
`
`Business strategy
`Our central strategy is to create a
`sustainable, profitable business by
`acquiring, developing and commercialising
`important life and physical science
`technologies that will shape tomorrow’s
`markets. This has not changed.
`
`We are building a broad, diversified
`portfolio of technologies, to which we
`continually add promising new
`technologies. We move these forward by
`securing strong intellectual property
`protection, by investing where appropriate
`in developing the technology, and by
`selecting the optimal route for
`commercialisation. The two most
`
`5 BTG plc Annual report and accounts 2003
`
`

`

`Chief Executive Officer’s review (continued)
`
`BTG’s corporate road map
`
`National Research
`Development
`Corporation
`(NRDC) founded
`in 1948
`
`NRDC merges with National
`Enterprise Board in 1981 to
`create British Technology Group
`
`Torotrak, developing an infinitely
`variable transmission for cars and
`lorries, demerged in 1998
`
`Following privatisation
`in 1992, the Company lists on
`the London Stock Exchange
`in 1995 as BTG plc
`
`1980
`First MRI licences granted
`
`1990
`
`1940
`
`1950
`
`1960
`
`1970
`
`Commercialisation of the
`cephalosporin antibiotics,
`alternatives to penicillin,
`and Pyrethrin, the first
`environmentally friendly insectide
`
`The cholesterol
`assay, a new method
`of testing blood
`cholesterol levels is
`commercialised
`
`US and European regulatory
`approval for Factor IX, a
`recombinant treatment for the
`bleeding disorder haemophilia B
`
`Provensis Ltd
`formed to develop
`VARISOLVE®
`Microfoam as a
`new treatment for
`varicose veins
`
`refocused the business to concentrate our
`investments on the highest-value
`technology sectors and opportunities. We
`have withdrawn completely from some
`areas where we believe the long-term
`economic prospects are poor. In doing so,
`we may miss out on some opportunities,
`but we believe the strategy we are
`following is appropriate for the market
`conditions in which we are operating.
`
`We have structured our technology
`investments around five business
`areas: ageing and neuroscience;
`biopharmaceuticals; oncology;
`semiconductor technology, including
`optoelectronics and nanotechnology;
`and an area we call strategic business
`development. The latter aims to exploit
`substantial IP-driven commercial
`opportunities that fall outside the four
`targeted areas. The Chief Operating
`Officer’s review describes these areas
`in detail.
`
`A regrettable but inevitable consequence
`of increasing our focus was a reduction in
`our people of about 30%, which was
`completed in December. Ceasing
`investment in certain technology sectors
`and reducing our headcount will yield
`savings of about £6.0 million per annum
`from the financial year ending in March
`2004. In making these changes, we have
`assumed that the current economic climate
`will continue for another two to three
`years. We will continue to monitor both
`our own operating performance and the
`general economic outlook. We have the
`flexibility to adapt our operations should
`circumstances change.
`
`6 BTG plc Annual report and accounts 2003
`
`People and capabilities
`In July we created an Operational
`Leadership Team chaired by our Chief
`Operating Officer, Anthony Lando. This
`team is responsible for delivering the
`business results agreed with BTG’s Board
`and Executive Committee.
`
`We have a strong management team and
`highly capable and committed employees.
`Even in these adverse times we are
`stepping up our commitment to providing
`appropriate training and development.
`This year we have also introduced a new
`“balanced scorecard” compensation plan
`for all employees to provide the strongest
`possible consistency between the activities
`and goals of individuals, teams, the
`Company and shareholders.
`
`Provensis
`The Provensis team made significant
`progress during the past year as the focus
`for VARISOLVE® Microfoam has shifted
`to completion of trials, regulatory filings
`and commercialisation.
`
`Clinical update
`The final patient in the European Phase III
`trial was treated in January, and over half of
`the 439 patients treated with VARISOLVE®
`Microfoam have now completed their
`extensive one-year follow-up. A further
`223 patients were treated with surgery or
`alternative sclerotherapy.
`
`Data collection and consolidation are
`ongoing, and the final study report is due
`later in the year followed shortly by
`publication of efficacy and safety data.
`Preliminary indications are that the
`
`results of treatment with VARISOLVE®
`Microfoam have lived up to expectations
`and are in line with those observed in the
`European open label and Phase II studies.
`
`In the US, the first cohort of twenty
`patients in the Phase II trial has been
`treated and data submitted to the Food
`and Drug Administration for review.
`
`Manufacturing
`Agreements are now in place covering
`each stage of the manufacturing process
`and the supply of VARISOLVE®
`Microfoam for clinical trials and
`commercial launch.
`
`The product is an integrated bi-can unit
`that, at the point of use, produces a sterile
`microfoam containing polidocanol. Croda
`Chemicals plc will manufacture the
`polidocanol in accordance with cGMP
`under an exclusive supply agreement;
`the plant is being prepared for regulatory
`inspection. Bi-can components have
`been sourced from a range of established
`suppliers, for assembly and manufacture
`of the finished product by CP
`Pharmaceuticals Ltd on their Wrexham
`site. CP Pharmaceuticals has MHRA and
`FDA approval for the manufacture of a
`wide range of products including sterile
`dosage forms for the global market.
`
`A pilot scale plant providing materials for
`clinical trials and stability studies is already
`operational at this site. Working with CP
`Pharmaceuticals and design consultants,
`Jacobs Engineering Ltd, we have
`commenced construction of a new
`manufacturing facility at the Wrexham site
`
`

`

`Since its foundation in 1948 by the UK government, BTG has commercialised many important
`innovations in the life and physical sciences. Originally, all of our technologies came from UK
`universities. Today, half come from industry, and roughly a third each comes from the UK, the rest
`of Europe and North America. We have focused our investment in five key technology areas, and
`we are working towards our target of profitability by 2006, with sustainable growth beyond.
`
`Responding to changes in the
`economy and its marketplace,
`BTG focuses its business on
`five core areas to invest
`carefully and control costs
`
`BTG is targeting a return
`to profitability by 2006, and
`sustainable growth beyond
`
`2002
`
`2003
`
`2004
`
`2005
`
`2006
`
`VARISOLVE®
`Microfoam
`completes European
`Phase III trial
`
`Target for first European
`launch of VARISOLVE®
`Microfoam
`
`BTG reports first
`profit since becoming
`a public company
`
`Rights Issues raises
`£122.0 million to
`expand the business
`2001
`
`2000
`
`Campath® (alemtuzumab), the
`first humanised monoclonal
`antibody, approved as a
`treatment for chronic
`lymphocytic leukaemia and
`launched in the US and Europe
`
`for the supply of commercial product. This
`facility will be owned by Provensis and
`operated by CP Pharmaceuticals, who will
`also provide full support services.
`
`Initially, a small-scale production line will
`be established within the new facility to
`support early product launches. This can
`be expanded rapidly as the product
`becomes established and demand increases,
`thus providing flexibility and phasing of
`the manufacturing investment over a
`number of years. An investment of up to
`£7.4 million will be made this year to
`construct the outer shell and small-scale
`production line.
`
`Market and commercial options
`The commercial success of VARISOLVE®
`Microfoam will be driven by the strength
`of the regulatory package, backed up by a
`strong brand and IP position, and extensive
`technical and commercial know-how.
`
`Recent market research with physicians
`and consumers has better defined the
`target audience and provided an increased
`understanding of the prevalence and
`demographics of varicose veins. With its
`large and ageing population, high
`disposable income, familiarity with self-pay
`and interest in new treatment options, the
`US will account for a majority share of the
`value of VARISOLVE® Microfoam.
`
`Plans to develop a strong brand position
`in the US and other markets are well
`advanced. The IP portfolio is being
`developed, with additional patents and
`patent applications already granted, filed
`and planned to add to the original patent
`
`7 BTG plc Annual report and accounts 2003
`
`assigned to BTG by the inventor of the
`technique that is the basis of VARISOLVE®
`Microfoam. The original patent is being
`challenged in Germany, where the Court of
`First Instance ruled it invalid. BTG believes
`this decision was wrong and is appealing
`against it, even though we believe the loss
`of this patent would have no impact on
`the commercial prospects for the product.
`The decision only has effect in Germany,
`and the patent remains in force there
`pending the outcome of the two-to-three
`year appeals process.
`
`We are currently considering
`commercialisation options which
`include the licence to, or joint venture
`with, an established healthcare company.
`With only around 1,000 specialist vein
`clinics in the US, however, another option
`is for Provensis to bring the product to
`market itself with contracted support.
`
`Data from the European Phase III trial
`and additional market research studies,
`under way since the start of the year, will
`be central to the decision as to which
`option provides the best risk-reward
`profile. It is expected that, in association
`with the Provensis Board, the Board of
`BTG will decide upon the preferred
`commercialisation option during the
`current financial year.
`
`Management
`Provensis has its own Board of experienced
`executive and independent Directors,
`chaired by Dr John Preston. During the
`past year, as the focus has shifted from
`technical and clinical development to the
`completion of trials, regulatory filings and
`
`commercialisation, the management team
`has also been changed and strengthened.
`Dr Frank Armstrong, formerly with
`ICI/Zeneca Pharmaceuticals and Bayer
`AG, has been appointed Chief Executive
`Officer and Director of Provensis. We
`thank Dr Paul Harper, former CEO, for
`his major contribution during the
`development period for Provensis. In
`addition, Provensis has appointed a new
`Chief Financial Officer and new VPs of
`Marketing and Medical and Regulatory
`Affairs. This team is wholly focused on
`market launches in the EU in 2005 and
`the US in 2006.
`
`Outlook
`As valuable as we believe the
`VARISOLVE® Microfoam product to be,
`the success of BTG’s business depends
`upon the performance of the technology
`portfolio as a whole. This year, for
`example, we expect revenue growth to
`result from newer products such as
`Campath®, and from technologies we
`expect to licence or otherwise
`commercialise during the year. We
`anticipate further significant operational
`and financial progress in the coming year.
`
`Ian Harvey
`Chief Executive Officer
`
`

`

`Chief Operating Officer’s review
`
`‘We have focused our investment in the areas
`where there is greatest demand for innovative
`products: ageing and neuroscience therapeutics,
`biopharmaceuticals, cancer treatments,
`and semiconductor technologies including
`optoelectronics and nanotechnology.’
`
`The Chief Executive Officer’s review has
`described why and how we have focused
`our business to concentrate our investments
`on those technology sectors that we believe
`offer the greatest opportunities for value
`creation. This review describes how we are
`structured to capture value in each of the
`areas. It also outlines the progress we have
`made during the past year, and highlights
`some of the technology development and
`commercialisation projects under way that
`will drive the business towards profitability.
`
`Business focus
`BTG has four business units focused
`respectively on ageing and neuroscience,
`biopharmaceuticals, oncology,
`semiconductor technologies including
`optoelectronics and nanotechnology, and
`a fifth team, strategic business development,
`which seeks to exploit opportunities that
`may fall outside the targeted areas.
`
`The business teams have seven to nine
`members, who together have appropriate
`technical and scientific expertise as well as
`strong commercial experience. Each team
`acquires, develops and commercialises
`technologies in its own area, and each has
`specific budgets and operating targets.
`
`The teams draw on the expertise of
`operating support units, including patents,
`legal and finance, all of which play an
`integral role in the acquisition,
`development and commercialisation of
`technologies. A dedicated licensing support
`and assertion team works with each
`
`business unit on commercialisation.
`A ventures team works with the business
`units when an opportunity is best addressed
`through a start-up route, and it also seeks
`ventures opportunities with third party
`investors and entrepreneurs.
`
`Improved processes
`During the year we streamlined our
`operating processes and created a new
`Operational Leadership Team responsible
`for the performance of the technology
`portfolio. The changes have improved both
`our flexibility to respond quickly to new
`opportunities and our ability to monitor the
`progress of technologies to facilitate go/no
`go decisions at appropriate milestones.
`
`A new technology is only accepted into
`the portfolio if it meets strict criteria,
`which are based around technical feasibility,
`patentability, the competitive landscape, the
`market opportunity, the BTG “value add”
`and the investment required to create value.
`We screen about twenty times more
`technologies than we accept and we have,
`through improving our processes,
`substantially reduced the time it takes to
`screen an opportunity. This is important
`since the technology source, usually a
`university or company, needs to know
`as soon as possible whether we wish to
`acquire it or not. During the year, we
`acquired thirty-four new technologies.
`Once accepted, for each technology
`we prepare a business plan and, where
`appropriate, a technical development plan.
`Teams have the authority to invest in
`
`further technical development up to certain
`limits. Investment in technical development
`is designed to generate further proof of
`principle and to create a commercialisation
`package, which is then used to attract
`licensees or external investors. This year we
`authorised twenty-four new development
`projects, with a combined financial
`commitment of £2.8 million.
`
`BTG adds value to a technology by
`investing in development, by securing
`str