House of Commons - Science and Technology - Fifth Report

Select Committee on Science and Technology Fifth Report

APPENDIX 2

Memorandum submitted by Cameron McKenna

SCOPE OF OUR INSTRUCTIONS

The solicitors to British Biotech plc ("the Company") who have acted on its corporate matters over recent years are Slaughter & May. We were approached by the Chairman of the Company and its in house legal adviser in mid-March 1998, shortly after the suspension by the Company of Dr Millar, to conduct an urgent investigation, as an independent firm of lawyers having expertise in the pharmaceutical sector and in corporate finance.

The scope of our instructions were to investigate certain factual matters and report on these matters confidentially to the Chairman and non-executive Directors of the Company. The matters which we were requested to investigate were set out in the first three pages of a document we were shown headed "inside information" which had been sent to British Biotech Plc under cover of a fax from Kleinwort Benson dated 11 March 1998.

We were informed by the Chairman and the Company's legal adviser that our reports would be addressed to the non-executive Directors and Chairman but that our report on two specific issues might also be released to the Company's principal shareholders namely Perpetual and Mercury Asset Management. The two discreet issues upon which our report would be sent to the shareholders, the terms of reference of which were agreed by Perpetual, were the directors share dealings in January 1995 and the status of an SEC investigation in the United States.

PREPARATION OF OUR REPORT

After our initial meetings with the Chairman and the legal adviser to the Company, we drew up and agreed with the Company a list of issues based on the "inside information" document. It was agreed with the Company that our report would not extend to investigating the Company's strategy for developing drugs.

The Chairman perceived a need for us to provide a report urgently on the two specific matters referred to above, for the shareholders. We produced a draft interim report on the subject of the SEC proceedings. This was a desk top report based on information provided to us by the Company's US lawyers, Sullivan & Cromwell, who approved the content of our report. We also produced, at that stage, a summary of our progress on the directors' share dealings investigation.

Our investigation then proceeded on three main topics: the share dealings in January 1995 in relation to the subsequent announcements regarding batimastat, the SEC investigation and the Zacutex trials. The depth of our investigation was limited (by the agreement with the Company) because of the pressure of time and the need to maintain confidentiality.

Our investigation was conducted by interviews of all the principal people in the Company involved in these matters and a number of the former directors. Some of the interviews were face to face while others were conducted by telephone. We also called for papers relating to the clinical trials and other matters, from the Company. We received every assistance from the Company. We interviewed Dr Millar at his home on Friday 3 April 1998.

In mid-April we issued our final report on the SEC investigation and the Directors share dealing to the Chairman. In relation to SEC matters we made it clear that our report was based on information provided by the Company's US lawyers. In relation to the directors dealing report, we stated that further information might be forthcoming from third parties (for instance the clinical investigators who attended the LGOG meeting in January 1995).

CONCLUSIONS IN OUR REPORTS

As the committee is no doubt aware, we concluded in our report on share dealings that there was no evidence to suggest that it was reasonably probable that a London Stock Exchange announcement would be required in relation to the Company as at 17th January 1995; therefore the dealing on 17th January 1995 by the directors was permissible under London Stock Exchange Code.

Following completion of this report, we obtained with the help of the Company the minutes of the LGOG meeting in January 1995. This reinforced our view expressed in the conclusion of our report.

As regards to the SEC investigation, we reported that there was an ongoing investigation by the SEC in relation to the two press releases by the Company dated 30th November 1995 and 21st May 1996 which relate to the progress of the drug Marimastat. We were informed by the Company's US lawyers that the investigation now relates to a particular aspect of the two press releases referred to above.

The final part of our work in investigating the factual matters related to the clinical trials on the drug Zacutex, for treatment of acute pancreatitis.

We have not issued a final report to the Company regarding this drug since our work was overtaken by the Company's requirement to put out a full ciruclar to shareholders. We concluded that we were unable to reach a final conclusion on Zacutex issues since to reach a concluded view would require technical and medical independent advice to establish what the position was regarding the responses from the EMEA.

Although we act for a number of other biotechnical and pharmaceutical companies, in view of the engagement with British Biotech, we consider it is inappropriate for us to comment on what impact we think the British Biotech affair is having on the industry as a whole. Furthermore we also suggest that this issue is one which might more appropriately be addressed to merchant banks or investment houses who are active in this area.

© Parliamentary copyright 1998
Prepared 13 October 1998