Examination of Witness (Questions 420
- 439)
TUESDAY 28 JULY 1998
DR PETER
LEWIS
420. And it turns out now that he was quite
alarmed at that time by his findings.
(Dr Lewis) He did not convey that to me and in fact
there is plenty of documentary evidence that he was not alarmed
or pessimistic. In fact, I included a couple of bits of evidence
on that on the Marimastat front. There was a meeting with an outside
consultant in February when he was very bullish on the whole thing
and he did not indicate in any way that he was worried about Marimastat.
421. I saw that letter. He told us in his evidence
on several occasions that he did communicate his pessimism to
yourself in the full expectation that would then go on to McCullagh
and the directors.
(Dr Lewis) I know he said that and really I cannot
corroborate that. He was not pessimistic. He was very upbeat on
both Zacutex and Marimastat. If anything I was the one who was
calming him down and saying "Yes, but we cannot extrapolate
from phase two to phase three, one never knows", etc. I think
I was the voice of reason. I am generally known to be somewhat
pessimistic and downbeat about these things, I always tried to
restrain Dr McCullagh's optimism on things. Really it does not
tally. I think he is rationalising backwards to something which
did not happen.
422. The line that he gave us three or four
weeks ago when he gave evidence was to the effect that he became
very concerned by what he had found in unblinding, that he conveyed
these in verbal form at least to yourself expecting that message
to be passed on and it was not passed on. We asked Dr Millar why
not, why did he think this would not have been passed on, and
he made reference to the fact that you had share options, quite
large share options, and in his evidence to us he told us that
you sold a large amount of shares in March or April 1997 while
in receipt of this information. Is it true that you did sell a
large amount of shares during that period, March/April 1997?
(Dr Lewis) In March, just before the beginning of
the new financial year, I exercised half the options I had available
and I sold 250,000 shares, but I retained as a result of the exercise
all the profits from that exercise as British Biotech shares.
I acquired only shares as a result of that exercise. Although
I sold shares I did not receive any money, I ploughed all the
money back into shares. I became a shareholder of 400,000 British
Biotech shares.
423. Were you involved in the January 1995 inquiry
by the Stock Exchange?
(Dr Lewis) No. I bought shares on that occasion.
424. Can you see that there is another construction
here that Dr Millar put to us of him having unblinded the trials,
having told you about these results in broad terms, expecting
that message to be passed on, finding that it was not and coincidentally
at this very time you were involved in share dealings within the
company?
(Dr Lewis) Yes, I understand the construction; it
is just that he did not do this. He did not pass this on. He was
not pessimistic; he was actually optimistic. I mentioned he was
optimistic on the Marimastat front, he was also very optimistic
on the Zacutex front. He fought like mad with the Commercial Director
in order to have control over post-marketing medical direction,
for example, showing that he was actually very optimistic about
the situation with Zacutex. Really it does not hang together.
The reason why I exercised those share options in March was nothing
to do with that; and in fact I acquired shares at what subsequently
turned out to be an absolute top price for them, £2.48 every
share I bought. If I was worried about the fact that everything
was going to go wrong and the shares were going to plummet I would
hardly have acquired 400,000 shares at that price.
Mr Beard
425. I find it difficult to square that answer,
Dr Lewis, with the answer you have just given me which was a somewhat
damning observation on the company's strategy which you summarised
as "ridiculous arrogant optimism".
(Dr Lewis) Remember when I wrote that letter it was
a year later. One of the things that I thought was an example
of Keith's ridiculous arrogant optimism was the way he chucked
Dr Millar out of the company. He thought that he could do anything.
I think I went on in the letter to say "...it is another
example that he just pushed you out of the company without thinking
through the consequences". He dismissed Dr Millar without
any sort of compensation and then he was surprised when Andy turned
on him and went to the press and so on and so forth.
426. That is mentioned but it is also mentioned
that that phrase occurs in the context of not out-licensing and
not taking partners on. In the context of your own answer earlier
this afternoon you said "we had six drugs in line, four failed
and two were still going on and there was an assumption that both
of them would go through unscathed". That is the context
of the optimism and yet in answer to my colleague, Dr Williams,
you are saying you saw no reason why you should not have high
expectations, and indeed in the statement you have given us this
afternoon you said "Certainly during my time at British Biotech
the company was extremely scrupulous in its handling of investor
relations. There was extensive consultation on press releases
and professional advice was frequently sought". I find it
very difficult to see how that phrase squares with the view that
you expressed privately that the company ought to be following
a quite radically different strategy and without following it
the risks were too great to tolerate so you were going to resign.
(Dr Lewis) It was over a period of time. I felt Keith
was optimistic. I regret the way I said he was arrogant, he was
just very sure of himself, and I felt he was taking the company
down this route which was unnecessarily risky. I thought, in fact,
we were going to win through. I thought we had some very, very
good products. Indeed, when I acquired those shares in March everything
was going well, we had just filed our first marketing application.
As I say, Andy was optimistic as well on Marimastat and Zacutex.
I was uneasy that everything was going too well and I did not
want to stick around in case it did not go too well. I suppose
that is the honest way of putting it. It sounds paradoxical when
you put it like that, Mr Beard. Really that was my feeling about
it. I was not immediately worried about anything in particular.
Things were going well. As I say, we were in a sort of black hole
as far as clinical trial results were concerned, one did not know
what was happening, but recruitment was going on reasonably well
in both of the studies and we had our first marketing authorisation
going through EMEA. It was quite a good time. I was taking my
time over leaving the company. I told Keith and Mr Raisman earlier
on that I wanted to leave. I wrote a letter of resignation in
April, which I fished out of the records and I have in fact given
to you. It gives those reasons why I wanted to leave and that
is a contemporaneous record. It says I was not happy with this
strategy.
Chairman
427. Can I take you back to a comment you made
just now. In criticising Dr McCullagh on two points; firstly,
you criticised him on the grounds that he treated Dr Millar badly
as a result of which Dr Millar went to the press, but the facts
are that Dr Millar went to the press first and it was Dr Millar
going to the press that irritated Dr McCullagh and caused Dr McCullagh
to see Dr Millar which resulted in Dr Millar's dismissal. The
second point I would like to make to you is that you have criticised
Dr McCullagh for firing Dr Millar, but you yourself said a few
moments ago that you would certainly not employ Dr Millar again
because he had far too many faults and you would never employ
him again. Is it not possible that Dr McCullagh had a little more
foresight than you did?
(Dr Lewis) Yes, I accept those criticisms. What I
really meant was that the way in which Keith dealt with this and
dealt with Andy, I read an account saying that Andy had asked
to leave the company and he wanted to get redundancy and wanted
to leave when he was passed over for the job of Development Director,
and Keith had refused him and eventually he fired him. I think
actually, according to one account I read, Andy did not go to
the press until he had actually been fired.
428. That is not the evidence we have.
(Dr Lewis) Well, I thought that was what the point
was.
Dr Gibson
429. Is Keith a man who would get his way with
commercial bankers, individual employees, a board of non-executive
directors? Did he always get his way and did he cut corners sometimes
in getting that, in your opinion?
(Dr Lewis) No, he persuaded people that this was the
right thing to do. He persuaded me for four and a half years that
this was the right policy and he is a very persuasive man and
a man of great ability. He did not cut corners and I do not want
to imply in any way when I am criticising Keith that he did anything
wrong and, I repeat, the investors knew exactly what he was doing.
Mr Beard
430. You say, Dr Lewis, that he was very persuasive,
but you have a strong scientific background in statistics as well
as in bioscience and medicine and you yourself have mentioned
this afternoon that you ended up with two drugs which the company
strategy was almost presuming would be certainly successful and
it sounds as though the probability of your succeeding was probably
about 40 per cent each. Is that a reasonable thing to assume?
(Dr Lewis) Yes.
431. So the company was dependent on two drugs
with a 40 per cent chance of success each, according to normal
statistics, which meant that there was a strong one-third chance
that neither of them would succeed, so the company's future was
based on two drugs with a one-in-three chance of failing, both
of them failing, and huge amounts of money were being raised against
this, and press releases were being put out in a very up-beat
way. I go back to your original judgment as that seems nearer
the line than the later judgments in that case. How can you explain
why you were persuaded by Dr McCullagh in these contexts? As the
chief adviser on scientific and clinical matters to the Board,
how were you persuaded to overcome those very, very salient facts?
(Dr Lewis) Well, in the first place, you are correct
in saying that if a drug is in Phase III, it does not have a 100
per cent chance of success, the argument being, "What is
the chance of success?" When a drug actually, however, has
been submitted as a marketing authorisation through a regulatory
authority, one is entitled to think that there is probably a 90
per cent chance of it getting through and that is what the case
was with Zacutex and it actually had been filed with the European
regulatory authority.
Dr Gibson
432. Was that for acute pancreatitis or severe
acute pancreatitis?
(Dr Lewis) For acute pancreatitis.
433. The word "severe" appears in
the shareholders' report.
(Dr Lewis) Well, what we did was we applied for the
widest possible indications to start with. When I was with the
company, and I was there for three months after the thing had
been filed, we applied initially for acute pancreatitis, knowing
that during the course of a negotiation, one usually gets toned
down to a more precise, more restricted indication. It was one
of the tactics in fact I referred to in one of my memos, which
I think you may have, that possibly, if there were objections
or difficulties, we would tone it back to severe acute pancreatitis.
That in fact means that there are fewer patients, but in fact
you can charge a higher price, so it is not a disaster. So that
is the answer.
434. So the answer is that there was zero chance
with acute, but 15 per cent or 30 per cent or something with severe
acute? You changed the parameters of the drug, from the shareholders'
report?
(Dr Lewis) Well, I did not write the shareholders'
report and I am not familiar—
435. I am talking about the company.
(Dr Lewis) Well, that is a potential issue which I
have not examined. I knew that at some point it was likely that
we were going to get restricted to severe acute pancreatitis.
As I say, that is about 30 per cent of acute pancreatitis and
it does not make much difference commercially because if you have
fewer patients, then the chances are that you will get a higher
price around Europe.
Dr Kumar
436. In your submission to this Committee, you
said that "it is clear that he", that is Dr Millar,
"engineered my early departure from British Biotech".
(Dr Lewis) Yes.
437. What evidence do you have to support that
view?
(Dr Lewis) Well, I did not know what had happened
and it was purely Dr Millar's evidence to this Committee. He talked
about things I did not know about. My experience of directly what
happened was that I had been negotiating with Dr McCullagh to
leave the company for three or four months and it had all been
very amicable, et cetera, et cetera. I came back from a
conference I had been at in early May and I was called in to Dr
McCullagh and he said, "I've changed my mind. I don't want
you to stay on. I am not happy about the way research is being
run, so I want you to leave immediately. I in fact have told your
reports that you are leaving and they are going to report directly
to me". Only a week previously he had given me a bonus and
said that he could not have achieved what he had done without
me, so something had happened and I did not know what it was.
It was only later, in fact precisely when I saw the videotape
of what Andy, Dr Millar, had said to this Committee that I realised
that he had been in there and made accusations about me and in
fact that was the net result.
438. Did you have any suspicion at that time
that he had engineered it?
(Dr Lewis) No, I had none at all. In fact I found
it a bit odd that I did not speak to Andy around this time, but
I was bounced out of the company so quickly that I did not really
have much chance to talk to anybody. I did not understand what
had happened and in fact as I wanted to leave anyway, I did not
really make any objections to it and I was relieved that finally
I was going to be doing something different, but I was upset about
it, very much so.
Dr Gibson
439. Why were you bounced, Dr Lewis?
(Dr Lewis) Why was I bounced? Well, because I was
asked to leave immediately.
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