1. NON-EXECUTIVE
DIRECTORS
I fully support the view, put forward by Dr
Lewis, that the non-executive members of a biotech company Board
should include at least one person familiar with the clinical
and regulatory aspects of drug development if that company is
intending to conduct its own clinical evaluation of compounds.
One item that does not seem to have been brought
up at your hearings is the fact that British Biotech, uniquely
among biotech companies, has never had a Scientific Advisory Board.
There was, as a result, no external validation of the programmes
except by individual clinical investigators, who did not report
to the Board in any way.
There were further problems with the non-executive
Directors at British Biotech:
(a) the executive Directors informed the
Chairman, Mr Raisman, as early as March 1995 that they were concerned
about the CEO. These concerns related to the lack of consistency
of Dr McCullagh, his tendency to exaggerate and consequently to
overexpand the company and his divisive approach to managing the
executive team of directors. This discussion was held at the request
of Mr Raisman, who was concerned about the heated nature of Board
discussions (particularly in February 1995 regarding the press
release about stopping the Phase 3 batimastat trial), and was
attended byDr Lewis, Dr Gordon and myself. Our views were sufficiently
strongly held for Raisman to declare that he would have to decide
whether to support us or the CEO. He informed us later that he
backed the CEO, in whom he had full confidence.
(b) The only non-executive to have first-hand
experience of the risks of drug development at a biotech company,
Dr Wilkerson, clearly picked up the dissension at the Board in
1995 (see Annex), but even his warnings were apparently ignored
by the Chairman;
(c) The non-executives failed to act after
the fiasco of the Board meeting on 16 February 1995, held to discuss
the batimastat press release. The crucial issue at that meeting
was whether batimastat would be able to restart a Phase 3 trial
within three to four months or whether a renewed Phase 2 programme
would be needed. This was highly significant to the Company, since
(and I think that Dr Lewis had forgotten this in his evidence
to your Committee) the key milestone for the successful exercise
of the warrants then outstanding was the expectation that we would
file for registration of batimastat in the first quarter of 1996—this
was spelt out in the rights issue document of April 1994. Dr McCullagh
had altered the press release at the last minute (while I was
in the USA) to make it much more optimistic and to claim that
batimastat would be back in Phase 3 within three to four months.
I had confidentially received a memorandum from Dr Millar explaining
that the best that we could hope for was a restarted Phase 2 trial
in four months' time. At a meeting sufficiently stormy for our
lawyer, Nigel Boardman of Slaughter and May, to be excluded, the
non-executives only took an interest in the press release when
Dr Gordon and I insisted on having nothing to do with the version
as proposed and said that we would not talk to analysts, journalists
or shareholders unless it was altered. In other words, not one
of the non-executives understood the business or the effect of
press releases well enough to act properly. I should mention that
Dr Wilkerson was absent from that meeting.
(d) Crucially, Dr Lewis was constantly urged
by Dr McCullagh to present only the rosiest view of the risks
of drug development. Indeed, this was cited by Dr Lewis as the
single issue he hated most about the company, when asked at an
off-site management meeting which I attended.
In summary, therefore, the chairman ignored
warnings from the executive directors, took no action in the face
of a letter from the most experienced non-executive, failed to
understand the relevance of a crucial press release and (see below)
even ignored the polite intervention of Kleinwort Benson. Neither
Dr Lewis nor I were contacted by any non-executive director upon
our sudden departures.
2. KLEINWORT
BENSON
I was a Director of Kleinwort Benson prior to
joining British Biotech and, as a result, was close to many of
the people there. I am surprised that the Committee was not told
the following:
(a) Dr Gordon and I met the former Chairman
of Kleinwort Benson, Simon Robertson, by chance in Tokyo in 1995.
He summarised a recent conversation with the CEO in terms diametrically
opposed to the version we had been given by the CEO himself, which
led to a discussion about the CEO's inconsistencies. This discussion
was subsequently reported by Robertson to the Chairman, who reprimanded
us for being disloyal but, so far as I am aware, took no further
action.
(b) Notwithstanding the argument about the
batimastat press release described above, the salesmen at KBS
told me that, at a presentation on the evening prior to the issue
of the release, Dr McCullagh had said that the company would be
back in Phase 3 in three to four months' time. This caused chaos
in the stockmarket on the day of the release because the company's
own broker was giving a message completely at odds with the press
release. This ended up with the salesmen having to apologise to
their clients, the institutional shareholders, and I received
a request from KB not to have the CEO at any future meetings with
shareholders, analysts or salesmen. As a result, Dr Lewis and
I did all the presentations for the next two years. I found it
rather amusing in this context that Dr McCullagh has still not
accepted the fact that the Phase 3 never did restart, since he
told your Committee that it had done so.
(c) After my departure from British Biotech,
I was invited to lunch separately by two senior directors of KB,
Tim Barker (who you recently interviewed) and Bay Green. I told
them both about the problems relating to the British Biotech Board
and that, in my judgment, it would lead to disaster if nothing
changed at the Board. I was not informed of the outcome, if any.
3. OVERALL
I would emphasise an important point made by
Dr Lewis, namely that much of this (bar Dr Millar's intervention)
has happened before, in the USA, with Gensia, Centocor and Synergen,
being but three examples of companies failing at Phase 3, with
disastrous effects on the share price. The result there has not
been to starve the industry of funds altogether, but rather to
make it all but impossible to fund the go-it-alone model of British
Biotech. Given the difficulty of achieving success with this model,
that may be no bad thing.
3 August 1998
