McCullagh resigns as Biotech head
Wednesday 20 May 1998
He believed it was best to "settle any uncertainty" and to "end the debate" by leaving the company in September that he had formed 12 years ago.
The move came as British Biotech tried to regain the support of shareholders by issuing a 30-page rebuttal of damaging allegations by the former head of research, Andrew Millar.
The company's share price fell a further 3p to 59p but there were signs last night that the salvage mission was succeeding. Influential shareholder Perpetual, which has been highly critical of British Biotech management, said it was "relatively satisfied" that outstanding issues were being addressed.
British Biotech said in the circular that it had already won the support of Mercury Asset Management which is the biggest single shareholder in the company.
Dr Millar had claimed in the past that investors were being misled by over-optimistic forecasts about the drug stream. He was sacked for making his views known to shareholders behind the board's back.
Dr Millar, talking from his home in Oxfordshire yesterday said it was "a bit of a relief" to hear that Dr McCullagh was going. But he added: "That should only be the first step in a corporate change of direction."
He had called for cutbacks and his wishes were granted yesterday. The company unveiled plans to reduce spending by making 42 staff redundant, amalgamating offices and developing a corporate alliance in the United States. But company officials said that the annual cash burn would remain at around pounds 50m to pounds 60m, meaning that it would run out of money within three years if new cash was not forthcoming.
Dr McCullagh insisted that all these plans had been in place - but not made public - at the beginning of the year. They were not introduced in response to Dr Millar's criticism, Dr McCullagh insisted.
At a special press briefing, a shaken-looking board led by Dr McCullagh and the chairman, John Raisman, received tough questioning but in turn attacked Dr Millar for damaging the company.
The board members said a decision to sue Dr Millar for unfounded allegations was under review and accused him of endangering two clinical trials.
They believed he was partly motivated by the fact he had wanted a job which had subsequently gone to an outsider, Dr Peder Jensen, who was at the conference yesterday.
Dr Jensen, a board member and development director, said Dr Millar had acted "improperly" in peeking at the results of two studies into various uses of Marimastat and Zacutex, the company's two main drugs.
Dr Jensen, who has been with the company for only three months, warned that "blind" trials could be deemed invalid by regulatory authorities and therefore could be delayed in coming on to the market, "in a worse- case scenario".
But Dr Jensen backed up one of Dr Millar's complaints by saying it would help if there were more people on the board with relevant experience.
On the central allegations of wrongful share dealings, a poor product pipeline and bad corporate strategy, the circular to shareholders said: "The board considers these allegations to be unfounded ... The board is convinced the company has real substance and a worthwhile future."
It also said that it was "fully satisfied" that Dr McCullagh had acted honourably throughout his 12 years at the helm of British Biotech. Mr Raisman said he would be taking steps to find a replacement by looking at both internal and external candidates.
Bob Yerbury, chief investment officer at Perpetual, which holds 9 per cent of British Biotech stock, said the decision by Dr McCullagh to leave was inevitable.
"I think his position had become very difficult inside and outside the company," said Mr Yerbury.
British Biotech's circular finally confirmed that the company is under Stock Exchange investigation but insists elsewhere that the board is satisfied that there is no substance to allegations that certain of the then directors of the company dealt in shares when they should not have done.
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