Appendix 1
THE BRITISH BIOTECH INQUIRY
Memorandum by British Biotech PLC
INVOLVEMENT WITH HSBC JAMES CAPEL
CHRONOLOGY
1. 30 November 1995
HSBC publish a research note on British Biotech
entitled "Promising results on marimastat". It includes
a "Hold" recommendation at £15 (British Biotech's
current share price—equivalent today £1.50). The note
follows the 1995-96 interim results group analyst meeting and
a marimastat press release.
2. 7 May 1996
James Capel publish a research note on British
Biotech entitled "Marimastat—still a long way to go"
ahead of the ASCO meeting, a major and international medical conference,
at which presentations were being made on marimastat on 21 May
1998. Note included a "Hold" recommendation at £28.45
(today £2.84Ö).
3. 21 May 1996
Presentations were given by marimastat investigators
at ASCO and simultaneously a press release was issued and group
analyst meeting held which HSBC attended. Martin Hall, pharmaceutical
analyst at HSBC, subsequently telephoned Katie Arber, Head of
Corporate Communications, and raised various questions arising
from the Company's 21 May analyst presentation and indicated that
a further HSBC note on British Biotech was planned. Katie Arber
replied by letter dated 6 June 1996.
4. 26 June 1996
James Capel publish a research note on British
Biotech entitled "Finals, Rights & Capitalisation: Opportunity
Knocks" co-inciding with the announcement by British Biotech
of a £143 million rights issue. Note includes a "Hold"
recommendation at £23.75 (today £2.73Ö).
5. July 1996
Discussions continue on marimastat trial results
by telephone with HSBC. A meeting is arranged in Oxford for HSBC
analysts, to address concerns they have raised on the marimastat
antigen trials. In a letter confirming the meeting on 14 August
1996, they state "of particular concern is the protocol of
the trial, the statistics employed in the data evaluation, the
claims made about marimastat on the back of these statistics.
Encompassed in the discussion will be the use of antigens as a
marker for clinical outcome."
6. 27 July 1996
Debate in Lancet (by letter) over use
of tumour markers in marimastat trials between oncologists at
Royal Marsden and Bart's Hospitals and British Biotech. (Note:
the letter's primary author based at the Royal Marsden subsequently
became a marimastat investigator.)
7. 9 August 1996
Meeting in Washington DC with US Food and Drug
Administration (FDA) officials and British Biotech to review marimastat
Phase II data and agree Phase III protocols (study designs). FDA
representatives include a statistician who at the meeting raises
no concerns on the statistical analysis of Phase II trials. Phase
III trial designs are designated by FDA as pivotal.
8. 14 August 1996
Meeting in Oxford of HSBC analysts, Martin Hall
and Steve McGarry, and their statistical consultant, Adrian Smith.
British Biotech represented by James Noble, Finance Director,
Andrew Millar, Director of Clinical Research, Alan Cornish, Head
of Biometrics, and Katie Arber, Head of Corporate Communications.
Discussion focuses on British Biotech's use of statistics in evaluating
data from cancer antigen trials.
9. 16 August 1996
Following meeting, hard copies of ASCO pancreatic
and ovarian cancer slide presentations and Lancet graph
data sent to HSBC by British Biotech.
10. 20 August 1996
Draft note on marimastat entitled "Reappraising
marimastat" produced by HSBC and sent to British Biotech
for comment.
11. 22 August 1996
Meeting in Oxford at British Biotech's request
to review draft note. At British Biotech's request, meeting attended
by Quintin Price, HSBC Head of Research, John Green, HSBC Head
of Securities, in addition to HSBC analysts.
12. 23 August 1996
Letter detailing Company's concerns sent to
Quintin Price by James Noble following meeting. Company confirms
it would be happy to attend institutional meetings to discuss
results, following publication of HSBC note.
13. 5 September 1996
Having first contacted Quintin Price by telephone,
Keith McCullagh writes to Quintin Price and provides the names
of oncologists who have experience of using marimastat in clinical
trials as suggested by Mr Price. At the same time, Dr McCullagh
writes to Martin Hall providing further detailed comments on the
"key issues" identified in the draft HSBC note.
14. 10 October 1996
James Noble receives a letter from Quintin Price,
dated 27 September 1996, confirming that HSBC are proceeding with
an independent review of the marimastat data and that HSBC would
abide by the findings of these experts. Mr Price requests that
all data on marimastat is sent by British Biotech to four oncologists—none
of whom have any experience of marimastat.
15. 13 October 1996
The Mail on Sunday says that HSBC is preparing
a critical report on British Biotech and its claims for a new
cancer treatment. The newspaper comments that "News of the
expected Capel report could hit British Biotech shares".
Since analyst reports may be price sensitive, it is accepted City
practice that reports should not be previewed prior to their publication.
16. 14 October 1996
James Noble writes to Quintin Price questioning
HSBC's wish to use a different set of oncologists outside those
with experience of marimastat but still independent of the Company.
He also raises the Company's concerns about the continuous trailing
of HSBC's forthcoming report, including in the Mail on Sunday.
The report is by now being generally talked about in the City.
17. 21 October 1996
Following a telephone conversation with Quintin
Price, James Noble supplies HSBC's four selected oncologists with
information on marimastat.
18. 31 October 1996
James Noble makes presentation on British Biotech
at HSBC's Biopharmaceuticals conference for investors. HSBC publish
summary note on British Biotech in an accompanying Biopharmaceutical
sector review.
19. 2-5 November 1996
Further presentations on marimastat by investigators
and British Biotech (Dr Millar) at the European Society of Medical
Oncology (ESMO) meeting.
20. 5 November 1996
James Noble writes again to Quintin Price since
the Compay learns from City comment that HSBC have published a
further note on marismastat, linked to ESMO presentations, on
4 November, ahead of the independent oncologists' findings. Publication
of HSBC note is unexpected since Quintin Price had written to
James Noble on 27 September 1996 saying that HSBC should "abide
by the findings of the experts." In his letter, James Noble
writes:
"However, I am finding it increasingly difficult
to agree with your position that your analysts and your firm have
not prejudged the whole issue following the note put out yesterday.
I have to say that I was also extremely irritated to have Martin
Hall deny point blank that such a note was in existence when I
had a copy in front of me (enclosed). To say that we disagree
with almost everything in the note would be an understatement.
It represents a gross caricature of the meeting (ESMO) and is
factually incorrect in a number of places. Interestingly, I ran
through with Martin Hall yesterday some of the data that was presented
at the meeting and he admitted he hadn't seen some of the data,
but that he is standing by the note anyway."
21. December 1996 to April 1997
British Biotech hears nothing further directly
from HSBC regarding its draft report. The Company continues normal
analyst relations with HSBC analysts including sending of news
releases, invitations to regular analyst meetings etc.
22. 19 May 1997
British Biotech learns that HSBC published a
bulletin on marimastat on 19 May and subsequently obtains a copy
from their analyst, Steve McGarry. Note follows further presentations
by marimastat investigators at 1997 ASCO meeting. Bulletin contains
factual inaccuracies.
23. 11 July 1997
HSBC publishes note on British Biotech following
announcement of preliminary 1996-97 results entitled "Finals:
Zacutex disappoints". The note includes a downgraded recommendation
from "hold" to "sell" at £1.85. Note
contains factual inaccuracies.
24. 15 July 1997
HSBC publish report on UK Biotech sector on
enquiry; Katie Arber is told that this report was not sent to
any company prior to its publication.
Around this time, Steve McGarry telephoned Katie
Arber to invite British Biotech to speak at the HSBC Biopharmaceuticals
conference in October 1997. Katie Arber says she will discuss
this internally, but as British Biotech have already committed
to speak at other investor conferences in September/October it
may not be possible.
25. 27 August 1997
Katie Arber calls Steve McGarry to let him know
that British Biotech have decided to decline HSBC's conference
invitation as a board meeting is being held in the USA the same
week.
Katie Arber also explains the Company's reticence
in terms of the distance between British Biotech and HSBC in relation
to their reporting of the Company. In particular, she reminds
him of a conversation they had following the publication of their
two page report on 11 July. She said that whilst appreciating
that different opinions existed, HSBC continued to publish material
with factual inaccuracies. Steve McGarry said that now that HSBC
were publishing on British Biotech again, having been prevented
from doing so by British Biotech for a year, all potential coverage
on British Biotech was being passed by James Capel's Head of Securities
division. He now reviews each British Biotech report and Steve
McGarry said he would ensure that it was then passed to British
Biotech for comment. He went on to say that whatever British Biotech's
comments, HSBC would not be "prevented" from publishing
again as they had been with their report last year.
26. 25 September 1997
HSBC send Katie Arber overview of British Biotech
for inclusion in thier Biopharmaceutical Review to be published
prior to HSBC conference. Katie Arber points out various factual
inaccuracies in draft. On publication, some of British Biotech's
comments are implemented. Note includes "sell" recommendation
at £1.67.
27. 5 November 1997
Keith McCullagh unexpectedly receives a letter
dated 5 November 1997 from Martin Hall and Steve McGarry informing
him that HSBC intend to publish a revised version of their note
"British Biotech—Reappraising marimastat". The
letter states that the issues raised by British Biotech in Keith
McCullagh's letter of 5 September 1996 have been addressed in
the revised version through a combination of the following:
(i) An extensive literature review
(ii) Review by a number of independent oncologists
(iii) Review by a senior statistician
(iv) An update based on results subsequently
released by British Biotech
HSBC invite British Biotech to comment prior
to the report's publication.
28. 14 November 1997
Malcolm Fallen, Group Finance Director, replies
by letter to HSBC, which is included as Annex 2. In this letter
he says, "In summary, we appear to be no further forward
from the position in August 1996. If anything the report, as now
written, appears to exhibit greater bias, has done little to take
account of the detailed responses provided to you last year to
improve the factual accuracy of the report and could therefore
be considered misleading." Ian Shackleton, HSBC's current
Head of Research, and Malcolm Fallen subsequently speak by telephone
and agree that issues remain to be resolved prior to the marimastat
note's publication. HSBC are to discuss this internally.
29. 25 November 1997
HSBC fax draft note entitled "Interims:
Buying in the future" to British Biotech for comment. Malcolm
Fallen calls Ian Shackleton, who agrees not to publish this note
until issues surrounding the marimastat note are resolved.
30. 17 May 1998
Mail on Sunday publish article which
claims that "In July 1996 the Company (British Biotech) gagged
City giant HSBC Securities from voicing concerns about the results
of clinical trials for marimastat. . .Biotech threatened legal
action against HSBC and the report was held back. . .HSBC now
plan to publish the blocked research note."
Throughout the discussions, British Biotech
at no time threatened legal action against HSBC. The Company sought
as Steve McGarry suggests in the same article that companies should,
"talk to the analysts to make sure they get the story right."
The quote included in the article which is attributed to Keith
McCullagh in a letter to HSBC does not exist and is misleading.
British Biotech's PR agency contacted Richard
Halstead, Mail on Sunday, to point out the various factual inaccuracies
and misleading comments.
31. 20 May 1998
HSBC publishes note on British Biotech entitled
"Playing with numbers" following publication of the
shareholder circular. This note incorporates their largely unrevised
note "Reappraising marimastat". The note co-incides
with the resignation of several members of the HSBC pharmaceutical
analyst team, including Steve McGarry, who are moving to a new
firm.
32. 21 May 1998
British Biotech discovers HSBC have published
on the 20 May the marimastat note during a meeting with a major
shareholder. The Company calls HSBC, Martin Hall, repeatedly over
several days requesting a copy which is eventually sent.
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