Speaking of approaches, here's an interesting FT article that came out over the weekend:
BRITISH BIOTECH: McCullagh's single-minded
vision
By Jonathan Guthrie
Keith McCullagh, chief executive of British Biotech,
christened his last sailing boat Bumpy Ride. That was
prescient: he is battling a storm that besets a company
formerly seen as the flagship of the biotech sector.
The whirlwind has been whipped up by Dr Andrew Millar,
head of clinical research. Dr Millar was dismissed on
Monday for allegedly revealing to shareholders
confidential information on internal strategy debates.
Those shareholders included Perpetual and Mercury
Asset Management, which jointly hold about 20 per
cent.
Since the dismissal of Dr Millar, it has emerged that the
US Securities and Exchange Commission is
investigating the accuracy of statements by the
company on the development of the anti-cancer drug,
marimastat.
It has also been suggested that British Biotech heard of
objections from European drugs regulators about the
anti-pancreatitis treatment, Zacutex, nine months before
telling investors that approval for the drug was likely to
be delayed.
The company said, however, it was in regular contact
with regulators during trials, and it was not normal
practice to share all correspondence with investors.
Dr Millar has said Mr McCullagh turned down his
requests for emergency reviews of trials on both
marimastat and Zacutex.
But the crux of Dr Millar's complaints is that the strategy
shaped by Mr McCullagh was plain wrong: that the hefty
spending plans of the company were too heavily
predicated on the success of a handful of drugs trials.
The protagonists in what has become a toe-curlingly
public confrontation present a piquant contrast.
Dr Millar is a straight-laced scientist, who seems
genuinely bewildered by the controversy that surrounds
him. Mr McCullagh, a former vet and research scientist,
is an entrepreneur. His burning desire is to turn the
business he founded with 11 staff in 1985 into a
world-class pharmaceuticals business.
Not for British Biotech the half-measures of merely
discovering and developing drugs, before handing them
over to big pharmaceuticals companies for the tricky
task of commercialisation. Instead, Mr McCullagh's
vision is of an integrated company, maximising revenues
by distributing its drugs through its own salesforce.
Success depends largely on one product, marimastat.
Its job is to inhibit the production by the body of an
enzyme which encourages tumour growth.
Marimastat has forecast peak sales of over œ800m. Nick
Woolf, a pharmaceuticals analyst at Bank America
Robertson Stephens described it as "first in its class.
Competitors are years behind British Biotech."
The first set of results from final phase III clinical trials on
marimastat will be published in the first half of next year.
If these are good, the company will have no problems
refinancing on the expectation of regulatory approval to
sell the drug, paving the way to profitability in the early
part of the next decade.
What alarms some analysts is that these early results
will be from trials of marimastat against one of the
toughest forms of the disease: pancreatic cancer.
But Mr McCullagh said pancreatic cancer was a natural
choice: "The disease is very difficult to treat, and that is
why we picked it. If it works it will be a major
break-through."
Anxious to avoid the impression he is betting the kitty on
one horse, he said another seven cancer trials "are
equally important."
But Mr McCullagh could be unseated by fund managers
sympathetic to Dr Millar, who are lobbying for him to be
replaced. The irony is that some of the personal
characteristics that have helped him create a company
that last year was close to joining the FTSE 100 appear
to have contributed to its current problems.
One of these characteristics is what James Noble, who
stepped down as finance director of British Biotech last
February, describes as: "a tremendously consistent
vision of the company's future. From day one, he has
wanted it to be an international pharmaceuticals
company like Glaxo."
Colleagues who do not share that vision say they have
sometimes received short shrift.
A leading investor in biotechnology companies said: "We
look for the messianic type, but he needs to have
disciples who help him keep his feet on the ground.
Keith is often unable to hear what people say to him."
Mr McCullagh denies this, saying communication is a
vital part of managing a team made up largely of
scientists: "They are highly intelligent and rational so
they need to be given good reasons for management
decisions."
He believes in "creating definite rules and structures,
which are still loose enough for innovation to flourish."
Communications between the company and the outside
world have been strained this week.
The main public response of British Biotech to media
criticisms has been to threaten Dr Millar with legal action
if he reveals "further" confidential information.
It has also taken out an injunction to prevent The Times
newspaper from publishing a confidential report on share
dealings by a group directors that included Mr
McCullagh.
The lack of public comment on Dr Millar's disclosures
has infuriated many analysts. Mr Woolf said: "I am upset
that all these revelations have dribbled out and that the
company did not disclose the information promptly as it
should have done."
However, Mr McCullagh said "I am satisfied that the
responses and comments we have given were
appropriate and correct."
He was stoical about the volatility of shares in British
Biotech. "The market works on pure sentiment. We have
had periods when the market has been over-enthusiastic
and other when the shares have been over-sold."
This is understandable. A market happiest assessing
companies with earnings and tangible assets has
struggled in valuing loss-making businesses, whose only
real assets are ideas.
Analysts have also had problems adjusting to
companies run by former scientists rather than career
managers.
Even the fiercest critics of British Biotech among the
analysts now believe its shares are undervalued at a
price only 30p above a break-up value of 20p. Some
believe Mr McCullagh will have to go before the price
recovers. Others think the company has no future
without him.
Mr McCullagh has no time now to sail Blue Genes, the
craft which has replaced Bumpy Ride. He has always
worked a 12-hour day, with only a day and a half off at
the weekend. Since Dr Millar was suspended in March,
even this respite has disappeared.
Fund managers and analysts supportive of Dr Millar
would like Mr McCullagh, who is 54, to spend more time
sailing. But they will have a tough fight.
Mr McCullagh said: "I do not take [the attempt to
displace me] seriously. I am the chief executive. I have
the support of the board and I expect to continue." |
