Scotia founder quits in shake-up at ailing biotech

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The Independent Online
Scotia, one of the UK's largest and oldest biotechnology companies, is replacing its controversial founder and visionary chief executive David Horrobin. He leaves behind a sprawling, unfocused group rapidly running out of cash. Sameena Ahmad reflects on his reign and looks at Scotia's future under a hard-nosed new leader.

In a wide-ranging shake-up which dealt another blow to the UK's battered biotechnology sector, Dr Horrobin is leaving as chief executive together with Sherri Clarkson, his wife, co-founder of Scotia and managing director of the group's drug discovery division and Jeffrey Boily, Scotia's managing director of commercial operations.

Though his replacement from January Robert Dow who joined Scotia three months ago from Roche insisted Dr Horrobin had not been asked to leave, analysts and observers close to the company said he was under increasing pressure to deliver a commercially successful drug and that his departure was hastened by the group's failure in March to get UK approval for Tarabetic, its lead oil-based drug.

Dr Horrobin, whose faith in evening primrose oil-based drug research has been scorned by some in the industry who say the technology is outmoded and of questionable scientific validity, receives no pay-off, though he stays with Scotia as a non-executive director and a consultant for the company on patents. Dr Horrobin has agreed to pay Scotia pounds 1m for the rights to develop 15 early stage drug development projects in psychiatry and asthma research and a further pounds 26m in milestone payments if all the compounds are successful.

Though not confirmed, it is likely that Dr Horrobin will fund this by selling some of his 17 per cent stake in the company, worth more than pounds 50m at yesterday's close. However, Dr Horrobin has agreed to hold at least 12 per cent of his stake in Scotia for 12 months before being allowed to sell.

Dr Dow, who joined Scotia in September this year as medical and development director and becomes chief executive in January, admitted that the company's costs had been spread too thinly.

He said he planned to cut the number of projects the company was working on and accelerate delivery of value for shareholders: "David has decided to go back to his original interests. He was not voted out. Scotia's real problem is that it has too many good ideas waiting to be developed. What we need is something different from the past. We need to identify key drugs and put money behind them."

John Savin, analyst at Grieg Middleton, said the company - which has less than a year's research spending left - desperately needed to cut costs.

However, Dr Dow said that he did not plan to reduce the group's 400-strong workforce or consolidate its six operating sites spread across the world from Nova Scotia to the Isle of Lewis. "Research costs of pounds 30m are pretty small compared to many biotech companies. But we need to make sure that the many is well spent," said Dr Dow, who is planning a review of Scotia's drug portfolio over the next three months.

He indicated that the group's food supplement division Efamol, might be put up for sale in the future: "I think Efamol needs to be developed. It would be foolish to sell it immediately. Current sales and margins don't reflect its long- term value."

Scotia's shares rose 20p at one stage yesterday before closing 10p down at 412.5p. This compares with a 735p high earlier in the year before the set back with Tarabetic.