Select Committee on Science and Technology Fifth Report


APPENDIX 5

Letter to Dr Ian Gibson MP from Dr James Noble, former Finance Director, British Biotech plc

  Further to our conversation today, I am writing to you as requested to set down for you some of the matters which we briefly touched upon. As former finance director of British Biotech, I have been following the investigation by your Committee with great interest and have had the opportunity to view the videos of the evidence given to your Committee by Drs McCullagh, Millar and Lewis. I should make it clear at once that I left the company in February 1997 and, therefore, cannot comment about the subject of unblinding the studies, since this episode began after I left. I would, however, like to make a couple of observations which may be relevant to your findings.

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:

    (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:

    (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


 
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