LONDON - Two of the U.K.'s leading biotechnology companies have faced up to the high cost of getting rid of unwanted executives as Chiroscience Group plc agreed to pay Nowell Stebbing, former CEO and deputy chairman, £3.25 million and Cortecs plc received a writ from Glen Travers, former chairman and CEO, claiming £1.5 million in compensation for his loss of office.
Chiroscience, the drug discovery and development company which acquired Darwin Molecular Inc., of Seattle, in December 1996, opted on July 6 to settle out of court with Stebbing. This was the day a writ issued by Stebbing on Feb. 13, 1996, accusing Chiroscience of wrongful dismissal, was finally to be heard at the High Court in London.
The company raised £2 million of the payment through placing 800,000 existing shares from the employee share ownership scheme with institutional investors. These shares had been held in the scheme since the time the claim arose and included shares to which Stebbing would have been entitled had he remained an executive at the company.
Most of the balance of the payment will come from a provision in the company's accounts to February 1998.
Shares in Chiroscience, of Cambridge, U.K., fell by 6 pence to £2.65 when the settlement was announced.
Stebbing, who currently is chairman of two unquoted companies - Axis Genetics plc, of Cambridge, U.K., and Pharmagene plc, of Royston, U.K. - sued Chiroscience for wrongfully dismissing him in August 1995. He also claimed damages for the wrongful removal of share options.
Stebbing became CEO in February 1993. He became ill with cancer later that year and subsequently stepped down to the post of deputy chairman, leading to the appointment of the current CEO, John Padfield, who joined in April 1994, two months after the company floated on the London Stock Exchange.
In April 1995, Stebbing became a non-executive director. At this point his contract was changed and his entitlement to share options was reduced. Stebbing then left the company in August 1997, receiving £101,000 compensation. In September 1997, he exercised share options worth £7.4 million.
Stebbing said he agreed to the settlement to avoid further personal stress involved in proceeding with the case. “It has been a very prolonged, expensive and stressful matter trying to obtain even a part of what Chiroscience took away from me,“ he said. “It is ironic that if I had been allowed my Chiroscience shares, I would have paid the company a great deal of money for them. Now the company has had to find money to pay me for not allowing me to purchase those shares.“
Glen Travers, founder of the drug delivery specialist Cortecs plc, must be hoping it will not take so long to settle his claim for compensation following his departure from the company last month. Travers says he was fired, while the company says he agreed to resign.
Travers is looking for two years' salary and other entitlements worth a total of £1.5 million, while a company spokesman said Cortecs, of London, believes he is entitled to six months' pay.
Travers left the company after two investors, who between them own 30 percent of the shares, expressed concern over the way it was being managed. The Cortecs' spokesman said the investors were unhappy with Travers' dual role as chairman and CEO and the slow pace of commercialization of the company's products. They also disagreed with Travers' strategy of seeking to retain maximum rights in collaborations, which the shareholders argued was putting off potential partners.
According to the spokesman, there is no indication as yet when, or if, the case will come to court. *