Loss-making British Biotech has joined forces with Swiss biotech company Serono in a deal which could mark an upturn in its fortunes, writes Maggie Hartford.

The company, based in Cowley, is allowing Serono to share in the rights to potential treatments for rheumatoid arthritis and multiple sclerosis in a collaboration which could be worth up to 53m.

Serono is paying an initial 3.6m and a series of undisclosed "milestone" payments dependent on research targets being met.

The deal is equivalent to more than a third of British Biotech's current market value of 140m. The company is worth less than a tenth of its value in 1996, after a string of disappointing clinical results for marimastat, its cancer drug.

Under new management, the company has cut its workforce from 311 to 140.

The deal with Serono means the two companies' scientists will jointly research and commercialise chemical compounds called metalloenzyme inhibitors, thought to be a possible treatment for serious inflammatory diseases.

Serono has an option on a potential rheumatoid arthritis treatment that is now being tested on volunteers, as well as the rights to a new drug intended to treat multiple sclerosis.

British Biotech will share the costs of research and will also benefit from royalties on any products which reach the market.

Chief executive Elliot Goldstein said: "This is an important long-term research and development collaboration."