Celltech chief stands to net pounds 930,000: Share option benifits for head of company not expected to make a profit for four years

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PETER FELLNER, chief executive of Celltech, the emerging biotechnology company which floated last week, will net more than pounds 930,000 from share options.

Meanwhile, the company is not expected to make a profit until 1997 at the earliest.

Dr Fellner, who joined Celltech in 1990, has more than 700,000 share options exercisable at 128p. However, shares in the newly public company were issued at 250p, almost double the price at which he can exercise his options.

The placing and public offer document reveals that he has 656,200 shares exercisable in Februay 1994, only three months after the flotation.

If they remain at 250p Dr Fellner will make a profit of pounds 800,564, although he will be unable to realise the gain for two years because of Stock Exchange restrictions on the sale of shares by directors.

Dr Fellner stands to gain another pounds 130,296 from two other tranches of share options exercisable in February 1995 and 1996 respectively. This brings the potential profit on his share options to nearly pounds 1m.

His generous benefits package will also include a four-year contract of employment.

The service agreement is for an initial two years, with a further two years' notice required to remove him, although other directors will enjoy only one year's notice.

A Celltech spokeswoman defended the exceptionally generous conditions. She said: 'Dr Fellner has been responsible for turning round the company.

'He has streamlined the Biologics arm (which makes monoclonal antibodies for therapeutic use) and refocused our research and development programme.

'We now have seven new products in 10 development programmes. We also have corporate alliances with American Cyanamid and Bayer.'

She added that in research-driven companies such as Celltech it was vital to tie in senior executives and to provide a generous benefits package that would attract people of the right calibre.

Dr Fellner has an impeccable track record as the former head of Roche UK. Even so, his terms of employment are likely to attract censure.

The City has widely condemned long contracts for directors because of the platinum handshakes then required to remove them.

It is also likely to be unimpressed by the discrepancy between the issue price and the point at which Dr Fellner's share options can be exercised.

Biotechnology companies are notoriously risky and Celltech's first product is not due to come to market until 1997.

Assuming the successful development and commercialisation of its two most advanced products, the company will not be profitable before 1997-98.