Examination of Witnesses (Questions 100
- 105)
WEDNESDAY 1 JULY 1998
DR KEITH
MCCULLAGH
AND DR
PEDER JENSEN
100. Let me talk about the biotechnology industry
in general. Do you not think that there is a predisposition here
to be excited about an up-coming industry which will make the
possibility of insider trading come along? There were shares sold
at a critical stage. Would you like to make a comment about that?
You know the newspapers have speculated on that. There was a lot
of money made as a result of dicey indications about the success
of these drugs. What do you say about that?
(Dr McCullagh) British Biotech is seriously addressing
unmet patient needs and trying to bring new drugs to market. At
no time have any of our directors acted improperly in the sale
of shares or the exercise of share options. I give you that as
a fact. It would be totally improper for executives to benefit
from any excess enthusiasm.
101. So no insider trading?
(Dr McCullagh) None at all.
Chairman
102. My final question and then Mr Beard will
ask the last series of short questions. With hindsight, Dr McCullagh,
and given the fact that Dr Millar's fears that batimastat and
Zacutex would not receive approval quickly, do you think the board
were right to press on contrary to the advice of their Clinical
Trials Director? Is there in hindsight anything of significance
that you would do differently?
(Dr McCullagh) Chairman, with respect perhaps I can
draw your attention to the circular to the shareholders in which
we laid out the events of the EMEA process. That is the process.
We print memoranda from the two senior executives in the company
responsible, Dr Millar who is responsible for clinical trials
and Dr Smith who is responsible for regulatory affairs. Both of
those memoranda recommend that their best estimate is that the
drug is likely to have good chance of approval. At no time during
the course of the review process with EMEA did they change their
view. Indeed, Dr Millar led the presentation in October 1997 to
the EMEA championing the drug and recommending approval.
Mr Beard
103. Could I go back to the question of your
business plan? As I understand your answer to the earlier question
it was that you felt you could overcome the odds which applied
normally in pharmaceuticals because you were dealing in this particular
field and you were a biotechnology company and you used, I presume,
your judgment to say you would be able to do that in formulating
your business plan. In addition to that, there was another judgment,
was there not? Most of the biotechnology industry has gone for
the sort of softer research and then the development has either
been sold on or done in joint arrangements, or companies have
merged with bigger companies to do it, but in your strategy you
were going to go on and do the whole thing internally in British
Biotech. So that was another aspect of your strategy. But is it
not the case that that then required a level of funding which
was really quite high compared with the rest of the biotechnology
industry, and the conflict between the uncertainty on the scientific
side and the need to keep that confidence going externally was
really what led to these circumstances? Indeed, you could not
in your strategy tolerate any bad news from either of your scientific
directors, because that bad news conveyed outside would jeopardise
the whole strategy? Is that not the bind you were in?
(Dr McCullagh) I do not agree with the analysis. First
of all, quickly, the strategy as adopted by the board—to
go it alone, as you call it—was in respect of cancer drugs
alone, marimastat in particular, in two markets, the USA and Europe.
We have a partner in Japan, Tanabe. That strategy was laid out
to shareholders in a rights issue document in 1996 and we provided
shareholders with the plan to get that drug and Zacutex, our leading
products, to market. We said very clearly: "This is not guaranteed;
it is pioneering research, but if we are successful it will be
a major benefit to patients, a major advance in cancer and in
the treatment of acute pancreatitis and there will be a major
return to shareholders." It is up to shareholders to invest
on that basis. They did so. In January of this year the board,
which has been keeping this strategy under careful review throughout
that period, decided that whereas the strategy for Europe was
correct and intact, its strategy for the USA would benefit from
having a large pharmaceutical company partner alongside us in
the USA as we attempted to commercialise that market. From January
we have been engaged in a process of seeking such a partner. Indeed,
when Dr Millar decided to criticise the company's strategy with
our bankers and our shareholders, Dr Kirby, our commercial director
and I were in the United States actually conducting negotiations
with third parties which would have brought about that partnership.
I just do not think it meets the facts to say that the board has
been not cognisant of the value of corporate partners—they
have throughout—but, above all, they have been trying to
provide the optimum return to shareholders given the balance of
all these factors.
104. Finally, what is the lesson you would learn
for the rest of the biotechnology industry out of this experience
you have gone through?
(Dr McCullagh) Of course, what has happened has been
terribly damaging to British Biotech, enormously to its shareholders,
but also to patients, and the unblinding of clinical trials has
damaged patients' interests in the trials we are conducting at
the moment. I think that our experience from these unexpected
events is that we have drawn a number of conclusions. One, I think,
is that as regards unblinding we have taken steps to make sure
that cannot happen again, by improving our procedures, but at
the end of the day you have to trust the people who work with
you and you do trust the head of clinical research in most companies.
Secondly, I think we have concerns about this tension between
our obligations to disclose to shareholders on the one hand the
material information about the drug in development, and our obligations
to the regulators to keep that process confidential until they
have reached a decision. There is a real tension there and it
is particularly acute for biotech companies because biotechnology
companies do not have earnings per share, they rely on the progress
of their drugs in development as the main determinant of value
as far as the shareholders are concerned.
Chairman
105. Thank you very much. It is now 5.30 and
I did say we would finish at 5.30. I am very pleased in your final
statement, Dr McCullagh, you did mention patients, because all
the work you are doing and all that is being done eventually is
for patients, even if others might have some interest along the
way.
(Dr McCullagh) Indeed.
Chairman: We have got round to mentioning patients,
some of whom may have suffered as a result of what has gone on,
and you have expressed your regret should that be the case. All
of us on this Committee thank you for coming along and helping
us this afternoon. I think all of us do realise that it is a very
difficult job, finding cures for these terrible cancers, and we
know that you have put up your fair share of effort. It is not
for this Committee to make any judgments. We thank both of you
very much indeed for co-operating with us and for coming along
this afternoon. Thank you very much.
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