LONDON - British Biotech plc said Tuesday founder and CEO Keith McCullagh will resign in September, but the company also released a statement to shareholders rebutting allegations of mismanagement made by the former director of clinical research, Andrew Millar, who was fired in April.
The statement claims the allegations made against the company and McCullagh are unfounded, and denies any connection between the resignation and the Millar affair. It states, “The board is fully satisfied that McCullagh has acted honorably throughout his leadership of British Biotech, while providing inspiration and leadership over many years.“
The statement also signals a change of strategy by British Biotech, which previously harbored ambitions of becoming a fully integrated pharmaceutical company, marketing its products directly in Europe and North America.
Chairman John Raisman said, “As part of the next phase of the company's strategy, we intend to seek a strategic alliance with a major pharmaceutical company for Marimastat in the U.S.A.,“ and that outside Europe, “Zacutex may be the subject of a marketing alliance or outlicensing.“
Marimastat, in Phase III, is an oral cancer treatment. Zacutex, also in Phase III, is a treatment for acute pancreatitis.
This change in strategy goes to the heart of British Biotech's argument with Millar, who was dismissed for discussing confidential company information with third parties. Millar is understood to have disagreed with the company's go-it-alone commercialization approach, and to have discussed his concern with the largest shareholder, Mercury Asset Management.
Raisman's statement to shareholders said there have been extensive discussions with Mercury Asset Management in the past weeks, which have “confirmed its support for the company's strategy.“
Charges By Ex-Staffer Widen
While the argument about commercialization strategy may have sparked his dismissal, since he left the company Millar has given several interviews to U.K. newspapers in which he has made further allegations. He claims the shareholders have been misled over the company's prospects, that the directors sold shares when they should not have, and that the product pipeline does not have much prospect of success.
Rebutting each of the allegations, Raisman acknowledged that the shareholders have had a “difficult time“ as a result of the Millar row. “You have seen the value of your holding fall substantially and, even though you will have known that investing in a company of this nature is high risk, the size and speed of decline has been hard for you and all concerned in the company to accept.“
When British Biotech, which is based in Oxford, U.K., said March 12 it was suspending Millar pending further investigations, the share price dropped 22 percent, knocking £100 million off the valuation. On April 20, when Millar was fired, the shares fell £0.025 to £0.565. A year earlier they stood at £2.90.
Initial reaction to the rebuttals and the news of McCullagh's departure was greeted positively, with shares rising £0.02 to £0.64. The shares closed Tuesday at £0.59, down £0.03.
The company is in a strong position financially, with £132 million in cash at April 30, down from £183.3 million at the end of April 1997. It plans to cut overhead by consolidating operations in Oxford and by making 42 staff reductions.
The British Biotech statement goes on to deal with each of Millar's allegations at length, in a blow-by-blow reprise of who said and did what to whom.
While Raisman expects the overwhelming level of detail will put an end to the affair, he ruefully noted, “Fresh allegations may nonetheless be made.“ He added, however, no further rebuttals will be offered.
The extent of the breakdown between Millar and the company is exemplified by the revelation that Millar unblinded two of British Biotech's Phase III trials, a monotherapy study of Marimastat in pancreatic cancer and a Zacutex study, without authorization. British Biotech is in discussions with regulatory authorities over whether this will invalidate the data.
Raisman also confirmed that as a result of Millar's allegations, the London Stock Exchange (LSE) has reopened an investigation into share dealings by British Biotech directors on Jan. 17, 1995, exactly a month before the announcement the company was dropping Batimastat, then in Phase III trials for the treatment of malignant ascites and malignant pleural effusion.
The LSE questioned these share dealings in April 1995, but did not pursue the matter. British Biotech said it is cooperating fully with the new inquiry. And it is still waiting to hear if an inquiry by the U.S. Securities and Exchange Commission will result in proceedings against it.
There is no indication of who will succeed McCullagh. Raisman said the gap between the announcement and McCullagh's departure “will allow for an orderly succession . . . in which both internal and external candidates will be considered.“ *