LONDON - The U.K. biotechnology industry needs a tighter regulatory regime to avoid a repeat of the problems that have dogged the onetime flagship of the sector, British Biotech plc, during 1998.

This is the view of the House of Commons Science and Technology Committee, which issued a report Monday of its investigation into events at Oxford-based British Biotech.

In particular the committee, composed of members of Parliament, said the government should use the drug regulatory system to ensure all companies use an external scientific advisory board to validate clinical trials.

“Such a device could serve not only as a source of valuable scientific expertise, but also as a means of protecting scientific objectivity,“ the committee said.

The report also pointed to conflict between the need for companies to keep investors happy with regular news flow and regulatory prohibitions on promoting drugs before they are licensed.

Alan Williams, who chaired the committee, said, “In an environment, such as the biotechnology industry, where subjective judgments and sentiment are so important in determining share price and company value, and where investors are to a large degree dependent upon the company to inform those judgments, accurate provision of information by the company is essential.

British Biotech Declines Comment

“We recommend that the regulatory bodies involved in drug licensing work with the Stock Exchange to ensure there is no conflict between the regimes they administer.“

Concern also was expressed that companies did not have boards with nonexecutive directors who “are familiar with the risks and vicissitudes of drug development“ to balance the views of those with business development expertise.

British Biotech declined to comment on the investigation, which the committee carried out because it was concerned events at the company would reflect poorly on the rest of the U.K. industry and affect its ability to attract investment.

Shares in British Biotech are about 10 percent of their peak of £3.70, reached in 1996. They have fallen sharply this year following the suspension, and then dismissal, of clinical research director Andrew Millar for allegedly divulging confidential company information to third parties.

Millar claimed that British Biotech released over-optimistic information about clinical trials, that the company's plan to market its own drugs was commercially unrealistic and that directors sold shares in the company when they knew bad news about drug trials was on the way.

The company has refuted the allegations, but as a result of pressure from investors, CEO Keith McCullagh is to step down in September; last week British Biotech announced the appointment of a new chairman.

It also has tempered its commercialization plans, saying it will seek a marketing partner in the U.S. for its oral cancer treatment, marimastat, which is currently in Phase III.

The House of Commons Science and Technology Committee declined to pass judgment on the alleged misdemeanors. However, it said that while Millar's actions were certainly “unusual,“ they “seem more the product of difficulties at British Biotech than the origin of them.“

British Biotech has been forced to wash its dirty linen in public. For example, the report details differences within the board of directors from 1995 onward and describes how Millar unblinded clinical trials when there was no safety reason for doing so.

But the committee failed to come up with a response to the question it set out to answer, which is what are the implications for the sector in general.

The report concluded, “It is too early to determine precisely what, if any, will be the long-term impact on investor confidence and future investment in the biotechnology sector.“ *

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