Terry Sadler is to step down as chairman and chief executive of Bioglan Pharma after its $765m (£527m) acquisition of Bristol-Myers Squibb's skincare division collapsed yesterday amid a deepening financial crisis for the pharmaceuticals company. Bioglan shares fell 70 per cent.
The debt-ridden dermatology specialist announced a root-and-branch review aimed at cutting costs and restoring it to financial health. It has debts of £115m and had been forbidden to increase them under its articles of association. The volatility and weakness of stock markets had made it near-impossible for the company to issue equity to reduce its borrowings.
Interim financing arrangements have been put in place until the end of the month. One hundred jobs, or 15 per cent of the workforce, are to be cut as pre-clinical and early stage clinical trials are halted. Bioglan had invested heavily in sales and marketing functions in expectation that the BMS deal would be completed.
The company, which posted pre-tax losses of £18m for the first half, has also adopted tougher accounting policies. "It's a total kitchen sink exercise," said one of its advisers. The shares closed down 51.25p at 25.25p. Mr Sadler moved to reassure investors yesterday that its cash-flow position was strong enough to see it through to the new year. The roles of chairman and chief executive would be split and replacements found for both positions, he said.
"I'm embracing change. I don't want to do anything that damages the company. It needs new blood," he said. "I still think we were right to go for the deal. It was bold and ambitious. We have been unlucky."
The appointment of a new chairman was likely within weeks rather than months, the company said, and a chief executive would be chosen after then. Mr Sadler is to become company president, a new full-time executive board position. He will not receive any payment in relation to his change of roles.
Bioglan's attempt to buy BMS's skincare unit would have made it the number five player in the sector. The plans stalled in July with the departure of the company's finance director, Peter Johnson, and subsequently its advisers, ABN Amro, apparently amid disagreements over how much to pay for the business. Goldman Sachs was appointed on 31 August to salvage the deal.
Mr Sadler would not comment on whether the advice had contributed to the company's predicament, although he regretted that he had not taken the opportunity to raise financing earlier. "Advisers advise and managers act. We chose to act in a particular way," he said.