Examination of Witnesses (Questions 229
- 239)
WEDNESDAY 15 JULY 1998
MR BOB
YERBURY, MR
NEIL WOODFORD
AND MRS
MARGARET RODDAN
Chairman
229. Mr Yerbury and colleagues, thank you very
much for coming along this afternoon. I take it, Mr Yerbury, that
we should direct our questions to you and if you feel it appropriate
to ask one of your colleagues to take the question, then you will
do so, but we will direct our questions to you in the first place?
(Mr Yerbury) Absolutely.
230. Thank you once again for coming to be with
us this afternoon. I am sure you followed our first evidence session.
You know how far we have got on this particular short inquiry
and I believe you were in the public gallery for the session we
have just had, so you know the questions we have already asked
this afternoon. In your memorandum, for which I thank you, you
stated: "In February 1998, conversations with a City analyst"—and
I think we probably know who that was—"heightened concerns
that you had about the company's level of spending". I think
you mean British Biotech—when you say the company's level
of spending and its ambition to develop into a fully integrated
pharmaceutical company. What was the nature of your concerns?
(Mr Yerbury) The concern was that the company seemed
to be spending money faster than would have been indicated by
the level of cash on the balance sheet and our concern was that
they might not have the resources to bring to fruition the product
that we were particularly interested in, which was Marimastat.
So the concern was that they were just spending money too fast
and it would not enable them to pursue the trials to the end of
their course.
231. In quoting from your memorandum I did actually
say when we referred to the City analyst that I think we had a
pretty good idea who that was. I think there is little doubt from
the previous evidence that that analyst was Jane Henderson?
(Mr Yerbury) It was.
Chairman: And I do not think there is any secret
about that? Dr Jones, did you want to come in at this point?
Dr Jones
232. Could you just tell us when Ms Henderson
phoned you exactly what she said?
(Mr Yerbury) I was not party to the telephone call.
233. Sorry, Mr Woodford, yes?
(Mr Woodford) I knew that Ms Henderson obviously was
going to see British Biotech. We had some concerns already before
that meeting and therefore we were very interested to see whether
somebody coming to it afresh was going to be able to be enthused
enough to want to initiate coverage, so it was quite an important
meeting and that is why the phone call took place after the meeting.
Obviously I was disappointed to learn that she was not going to
initiate coverage and I took that and what she said about the
meeting and the fact that she had decided not to initiate coverage
as obviously a negative signal.
234. So you knew that this meeting was going
to take place. She phoned you, rather than you phoning her?
(Mr Woodford) I cannot remember who phoned who actually,
but we had a conversation. I ring analysts, analysts ring me all
the time.
235. You say that you had concerns before the
meeting. What were those concerns?
(Mr Woodford) They were general concerns. We were
aware that the company was spending a lot of money. The rate of
cash burn had increased. We were not quite fully appraised of
how much that spending had increased, but what concerned us, particularly
with regard to Marimastat—and that has been the focus of
our concern all along—Marimastat is the anti-cancer product
in trials. It is in a number of different trials. We felt from
our analysis that the trials which had the greatest potential
to show efficacy for the product were the trials that would take
the longest to complete. The trial that was the quickest to finish
was the pancreatic cancer trial. That was going to complete in
the first quarter probably of next year, but it was a very high
obstacle for the drug to show efficacy in, if you like; pancreatic
cancer is a very vicious form of cancer as I am sure you know.
The current treatment is with cytotoxic drugs. The benchmark for
the action of Marimastat seemed to be very high. Basically, the
action of Marimastat, as you know, is to surround tumours; the
tumour in pancreatic cancer has been described to me as like a
steak on a plate and therefore with a limited amount of time it
was very difficult for the drug to do what it is intended to do
within the life expectancy of a patient who has this disease and
therefore it was a very tough trial. The concern was that if a
tough trial is not going to give the result that we were hoping
for, then this company has to have enough money left to see it
through to the end of the trials which will complete later, maybe
two or three years down the road.
236. So you would not have been worried if the
company had been spending money on buildings if you had been confident
that the drugs that they were producing were going to be successful?
You had doubts about the drugs too? I understand it was a long
period—
(Mr Woodford) Yes, there were certain—
237. But there were other drugs, the other two
drugs?
(Mr Woodford) The other drugs to an extent, or the
other one drug, were interesting but the focus of our attention,
right from the start when we started investigating British Biotech
was always the anti-cancer therapies, originally, Batimastat and
subsequently Marimastat. In our opinion, the focus of the evaluation,
the focus of the upside, if you like, was always in Marimastat
and therefore that was the centre of our concern.
Mr Beard
238. In what detail did you examine their business
plan, the proposal to develop three drugs and commercialise them?
(Mr Woodford) When we analysed the company obviously
the most important thing was to come to an opinion about the likelihood
of a particular drug showing efficacy in a particular therapeutic
area and then assessing the market impact or the marketing potential,
the size of the market for that drug.
239. When you took an interest in this, what
was the likelihood of the three drugs being successful from that
stage of development?
(Mr Woodford) In Phase I and Phase II, the chances
of producing a viable and profitable drug are fairly low. Different
analysts ascribe different probabilities to drugs in development
and normally there is a step change in the probability attached
to a drug going through that process. So if you are in Phase I
you may have only a 10 or 15 percent probability of achieving
a viable drug. If you get it into Phase II then there is a step
change in the sort of evaluation model and it may go up to, say,
30 or 40, and again if you get into Phase III then the probability
increases. So all the while what you are doing with a drug is
looking at the therapeutic area that drug is addressing and attaching
a probability to the ultimate market size.
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