ANNEX
Memorandum containing the Government Response
to the Fifth Report of the House of Commons Science and Technology
Select Committee, Session 1997-98
BRITISH BIOTECH
INTRODUCTION
1. The Government welcomes this timely report
from the Select Committee on the recent events surrounding British
Biotech and the impact on the wider biotechnology sector.[1]
In line with the Committee's principal observations and recommendations,
this Memorandum concentrates on the broader issues for the sector.
2. Within Europe, the UK has established
a clear lead in industrial biotechnology. By drawing upon the
strength of the UK's excellent science base in the biological
sciences, and investment by established companies in such industries
as pharmaceuticals, chemicals, food and agriculture, it is clear
that this is already a major area of economic activity with the
potential to create future wealth and improve quality of life.
As a truly innovative sector which epitomises the dynamism and
potential of a knowledge driven economy, the Government is determined
that the biotechnology sector should be sustained and enhanced.
The growing importance of biotechnology and the need to ensure
the co-ordination of cross-cutting issues has been recognised
by the Government through the creation of a new Cabinet Committee
on biotechnology.
3. The Government considers that the ability
of the UK sector to command the confidence of regulators, investors
and the public is of critical importance. For a young sector,
where the speed of development has been and will continue to be
rapid, it is useful to consider whether existing mechanisms are
capable of supporting this central aim. The Select Committee's
inquiry has made a helpful contribution to this process.
4. The following part of the Memorandum
follows the order of the Summary of Conclusions and Recommendations
of the Select Committee's Report.
IMPLICATIONS FOR
THE BIOTECHNOLOGY
SECTOR
5. The conclusions and recommendations in
italics refer to page iv of the Committee's report and also include
a reference to the relevant paragraph of the report.
In an environment where subjective judgements
and sentiment are so important in determining share price and
company value, and where investors are to a large degree dependent
upon the company to inform those judgements, "the accuracy,
precision and objectivity of information released . . . is vital"
(paragraph 12).
6. The Committee is right to draw attention
to this issue. The need for the highest possible standards of
objectivity and balance in the preparation and publication of
information to investors and others is of paramount importance.
The Stock Exchange's Listing Rules (see paragraph 14) already
place obligations on every listed company regarding the timely
release of all relevant information which is considered to be
price sensitive.
7. The improvement of communication and
understanding between smaller listed companies and institutional
investors is central to a new initiative to identify and promote
best practice being undertaken by the Department of Trade and
Industry, in partnership with CISCO.[2]
It is being overseen by a working group of smaller listed companies,
their advisers and fund managers. The group is chaired by Paul
Myners, of the NatWest Group, who chaired a similar group focused
on larger companies and their investors, which produced the much
welcomed "Winning Partnership" report. Results are expected
to be disseminated widely on completion of this new initiative
in early 1999.
8. In addition to these measures, the Government
notes with approval an initiative by the BioIndustry Association
(BIA)[3]
to develop a Code of Practice for the biotechnology sector. Such
a Code presents a real opportunity to further reinforce the obligations
companies have for the release of information on existing medicines
(and other products) and those under development. The Code would
be particularly relevant to those companies which have not been
floated and are not therefore subject to the Stock Exchange Listing
Rules. It would also complement guidance produced by the Association
of the British Pharmaceutical Industry.[4]
9. As the Committee notes in its report,
investment in the biotechnology sector is perceived by investors
as carrying a high degree of risk. As a consequence, it is important
to stress the responsibilities and obligations on companies in
connection with the information they release to investors and
others. Recipients[5]
of this information have a complementary role to play by being
rigorous and objective in the way in which they interpret the
information released to them.
We recommend that the Government, through
the regulatory system, encourage all biotechnology companies to
make full use of external scientific expertise and advice (paragraph
13).
10. Current regulations allow biotechnology
companies to make such use of external expertise and advice as
are necessary and appropriate to their business needs. The Government
therefore does not see a need to seek further changes to the medicines
licensing system; however, the new Cabinet Committee (see paragraph
2) will review a range of issues including regulatory matters
affecting biotechnology. The BIA has informed the Government that
the use of scientific boards is already common in the sector and
that companies are showing a growing recognition of the need to
secure additional objective external advice where appropriate.
11. The process of peer review is already
a well established part of the medicines licensing system. Medicines
undergo evaluation within either the Medicines Control Agency
(MCA) or the European Agency for the Evaluation of Medicinal Products
(usually referred to as the European Medicines Evaluation Agency—EMEA),
before being allowed onto, and once on, the UK market to ensure
that benefits outweigh risks.[6]
Under UK and European legislation,[7]
companies are required to submit, at the time of application for
a marketing authorisation, assessments of a medicine's pharmacological,
chemical, and toxicological properties and the supporting clinical
data on safety and efficacy. All data, and findings derived from
that data, are subject to close scrutiny by the regulator (the
MCA or EMEA), drawing on the advice of independent expert bodies,[8]
before a decision is made to grant a marketing authorisation.
Parallel arrangements apply to the assessment of veterinary medicines
involving the Veterinary Medicines Directorate[9]
and the EMEA.
We recommend that the Medicines Control Agency
and the European Agency for the Evaluation of Medicinal Products
work with the Stock Exchange to resolve any potential conflicts
between their respective regulatory regimes affecting the biotechnology
sector (paragraph 14).
12. The Government is not persuaded that
the respective regulatory regimes of the MCA and the London Stock
Exchange produce conflicts for the biotechnology sector or for
any other company involved in the development and marketing of
pharmaceuticals. Each fulfils different, complementary functions,
with the former regulating the standards of safety, quality and
efficacy of human medicines and the latter governing the dissemination
of potentially price-sensitive information by listed companies
to the market. Nor are the MCA or the Stock Exchange aware of
any conflict with the EMEA, which under EC Regulation 93/2309
is responsible for the assessment and approval of all biotechnology
medicinal product applications within the European Union.
13. The MCA does not regulate information
issued by companies about products prior to market authorisation,
unless that information is considered to be of a promotional nature.[10]
As the UK is part of an EU-wide medicines regulatory regime any
changes in the existing arrangements would need to be implemented
collectively.
14. Information released by listed companies
to financial markets is already governed by the Stock Exchange's
Listing Rules. These place a general obligation on every listed
company to disclose, without delay, via the Stock Exchange Regulatory
News Service, details of major new developments and changes in
company performance, or expectations of its performance, which
are not public knowledge and which may lead to a substantial movement
in the company's share price. In the case of biotechnology companies,
the state of progress of clinical trials for key drug programmes
(including major positive or negative changes to programmes) may
need to be disseminated to the market under this general obligation
of disclosure. It is important in respect of this obligation that
companies exercise care in interpreting the progress of discussions
and the significance of communications with regulators.
15. The Government has drawn the Committee's
report to the attention of the Management Board of the EMEA.
Biotechnology companies should be able to
call on appropriate expertise for all areas of company activity
and strive to reach a balance among their non-executive directors
between those who can offer crucial business development expertise
and those who are familiar with the risks and vicissitudes of
drug development (paragraph 15).
16. The Government agrees with the Committee's
observation. The Government has drawn this observation to the
attention of the BIA so it can consider the merits of including
guidance on this point in their proposed Code of Practice.
GENERAL
17. As indicated above, the Government notes
with approval the initiative to develop a Code of Practice for
the biotechnology sector. The Government will maintain a close
watch on developments in this innovative and fast-moving sector.
1 The biotechnology sector is here deemed to include
drug discovery companies, other emerging biotechnology companies,
as well as the application of this technology across a number
of industries, eg healthcare, chemicals, food, agriculture. Back
2 The association for smaller quoted companies. Back
3 The trade association for emerging bioscience companies in the
UK. Back
4 The ABPI Code of Practice for the Pharmaceutical Industry (1998)
applies to the promotion of medicines to members of the UK health
professions and others. Back
5 Including industry observers and commentators. Back
6 Marketing authorisation for medicinal products containing or consisting
of genetically modified organisms require environmental risk assessment.
Any release of genetically modified organisms can only proceed
after consent has been issued under the Deliberate Release Directive,
90/220/EEC. Back
7 The Medicines for Human Use (Marketing Authorisations Etc) Regulations
1994, which implement EC Directive 75/318/EEC. Back
8 In the UK a number of Medicines Act Advisory Bodies were set up
under the Medicines Act 1968, including the Medicines Commission
and the Committee on Safety of Medicines. Further information
about the functions and work of these Bodies and their membership
is given in their Annual Reports, copies of which are placed in
the Libraries of both Houses. Back
9 An Executive Agency of the Ministry of Agriculture, Fisheries
and Food. Back
10 The Medicines (Advertising) Regulations 1994 SI 1994/1932 prohibit
the issue of any advertising relating to a medicine in respect
of which no marketing authorisation is in force (Regulation 3
and 23). Back
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