Outlook: The Biotech buck doesn't stop here

IT IS HARD, reading yesterday's "we did no wrong" circular from British Biotech, to accept that this finally puts the lid on the extraordinary sequence of allegations which have coloured the company's affairs for the last few months. A brave attempt is made to rebut, point by point, the demolition job performed on the company by its former head of research, Dr Andrew Millar, and to some extent it succeeds. Crucially, however, the circular fails to give investors much confidence in the products the company has been developing, nor does it explain adequately why the company allowed, indeed encouraged, expectations of these compounds to become so inflated.

Furthermore, British Bio admits ominously that the London stock exchange has reopened its investigation into share dealings by directors, and worse, that the the US Securities and Exchange Commission has begun a top level investigation into whether investors were misled. This could lay the company open to corporate prosecution and be the grounding for an overwhelming array of class actions against the company and its advisers. Now why does it seem so unlikely that Dr Keith McCullagh's agreement to stand down as chief executive marks the final denouement?

And if Dr McCullagh has behaved honourably and impeccably throughout, as the circular insists, who then should shareholders blame for this terrible debacle, this sickening loss in shareholder value. The company would like us to believe it's all down to Dr Millar, who it paints as an embittered, misguided man with a very large axe to grind. Whatever the truth, the finger might also reasonably be pointed at the non-executive directors, and particularly the company's chairman, John Raisman, a former head of Shell UK. Dr Millar began to raise his concerns internally at British Bio long before he went public with them. It must have been obvious that a serious difference of opinion was emerging over the company's prospects and development.

Why was it that the chairman and other non-execs failed to nip this dispute in the bud or get to the bottom of its causes? Most biotechs are run by faintly autocratic, visionary biochemists who believe in the potential of their discoveries with all the passion of a zealot. They are not businessmen or even entrepreneurs out of the usual mould. It is incumbent on the non-execs to be especially careful to rein in the over- enthusiasm of their executives in cases like these. Plainly in this case, they failed utterly to do so. The buck shouldn't stop with Dr McCullagh. Mr Raisman's continued presence at the company inspires little confidence in the future.

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