BGC - THE COMPLETE STORY !!!!

Heebie

In the SIM case at least BTG didn't write the patents - they acquired them from Celltrace. How that came about I wouldn't know but I assume BTG must have checked and found value in them via litigation along with the license opportunity. But a loss amounts to the same thing - damage to reputation. Since the EPO's original decision was apparently pretty comprehensive I don't expect any trouble. Acambis payment for 'back pay' seemed OK, it was the forward stuff they seemed to let go. With question marks and a delay over Varisolve maybe they won't be so soft this time.

'.......the current price values BTG at well below the potential for all patents excluding Varisolve which itself should still come good in the long run.'

Absolutely correct IMO.

Example, Oxycodone HCl/ibuprofen, licensed to Forest. This was found during a patent audit somewhere, it's a presciption drug patented only in the USA and expected to generate revenues somewhere between Campath and Factor IX once approved. Forest actually have the approval letter but further studies are necessary before it gets the rubber stamp. £3m milestone coming BTG's way sooner or later and a quite fast uptake following.

harvester.....an outline for you.

BTG manufacture nothing, not even Varisolve, they created a 100% owned company called Provensis to do that for them. What they do is take promising tech from universities etc, wrap it in IP then license it out to whoever wants to take it up. Take up can take some time. In return they get 10-15% in royalties on marketed products (some don't make it) of which approx. 42% is shared back to source (ie the universities). In addition, milestone payments as the tech develops are often negotiated to cover BTG costs in case of failure. Finally, as IP experts, BTG sometimes persue via litigation for 'back pay' with patents they obtain.

The idea is that the strongly IP'd tech will generate consistent royalties over the patent life, so of course the more tech that reaches the market the more royalties BTG get. Hence in theory BTG is essentialy a company looking to grow as a bridge between the source and the market on the back of IP expertise broadly ensuring royalty streams.

This is a good general example of what they do



and (out of date re Varisolve) current state of play



It's important to note the ongoing royalty growth here IMO, (green columns, 2002/3 revenue analysis) and how milestone payments plus audit and sales of assets effect overall revenues.

Patents as said play a big part, for example the explosives and drug detection scan NQR (see list below) is based in the same tech as MRI. The SIM litigation case is another example, expect litigation re Teleshuttle as well.

In 1996 BTG announced an ambitious revenues target of £140m by 2006. These were put on hold with the discovery of Varisolve, the failure of a late stage medical compound (there's always risk!), the demerger of Torotrak and an RI in Nov. 2000 raising £122m for V's development (est. £35m) and cash to invest in tech with better earnings prospects. Just to complicate matters, they're also involved in some JV's and start ups. Here's some of the stuff currently in the portfolio, the ones in bold are expected to grow significantly (the others are 'mature'), the ones at the top are existing major revenue earners, next are major growth expected. Limited growth could be expected elsewhere, ie Enhanced Chemiluminescence (newly licensed BSE test) and Active-Ox (water purifier v legionaires disease).


Factor IX
Campath
Two-part Hip Cup
MLC
MRI
Needle Encapsulating Sleeve
Animal Health Vaccines
Enhanced Chemiluminescence
Active-OX
Haemofiltration System

Celltrace (SIM)
Oxycodone HCl/Ibuprofen
Teleshuttle
NQR
RFID
Mesophotonics
AQ4N
OLED
CURV

among the others......

DNA Separation
XMatchPro
Senexis
DiStream
Primaxis Ventures
BTG 1640


......many more, I think around 250 technologies are currently on the market. But look at the bold on the way, all wrapped in IP! Also besides the 'up and coming' stuff the 'top ten' above all have a long patent life except MRI.

Obviously lots of stuff doesn't earn much, the above are the best and in some cases hoped for stuff joining the best. BTG have around 4000 patents.

Revenues history (before sharing, including milestones, litigation etc)

1998 £19.82m
1999 £22.36m
2000 £28.8m
2001 £37.8m
2002 £33.2m
2003 £31.5m

Six months Interim Dec.1st '03 revenues £19.12m. Usual stronger H2 forecast, therefore full year March 2004 £40m+.

There's stuff coming through from previous investment with long patent life and the downturn has meant more RI funded stuff picked up on better terms with returns that are yet to come. No further RI for the core business is planned despite blowing around £30m in the last six months, approx. £50m cash remaining and 'in profit March 2006 without Varisolve' forecast maintained.

What interests me most is that unlike the lumpy revenues, the royalties on launched products have never failed to grow year on year, again, obviously the more tech marketed the more the royalties. Think about that given the stuff coming through, the RI investment under 'good' conditions to come and BTG's IP expertise.

Given the above revenues history, the royalties history, the downturn, the hold on growth brought about by Varisolve etc, the long patent life of the major existing and future earners, the fruits of RI investment yet to come, no RI forecast despite Varisolve delays, and 'in profit 2006' maintained ......

Varisolve? Hardly in the price and news awaited early this year. Patience is all that's required IMO, however, if the market 'turns bad' watch out cos it's still jam tomorrow.

Happy New Year to everyone.