BioWorld International Correspondent

LONDON - Elliot Goldstein resigned as CEO of British Biotech plc at the company's annual general meeting in London on Monday, following the failure of a proposed merger with MorphoSys AG.

Chairman Christopher Hampson told the attendees that in his four-year tenure, Goldstein had succeeded in restructuring the company, cutting cash burn and bringing in new products. "Nevertheless, despite these efforts and the company's relative financial strength and excellent staff, success has proved elusive and the market continues to ascribe a low value to the company.

"In these circumstances, the board had concluded that new leadership is appropriate and Elliot Goldstein has agreed to step down."

Tim Edwards, chief operating officer, will act as CEO until a replacement is found.

The merger talks with MorphoSys, of Munich, Germany, were initiated following a systematic analysis, over the past 12 months, of biotech companies across Europe and North America. They were called off at the end of October when British Biotech's board concluded that merger would not be in the best interests of the shareholders.

Hampson said that Oxford-based British Biotech, with £43 million (US$67.2 million) of cash at the end of September, remains committed to participating in M&A activity. "The board continues to be open to possible corporate transactions which combine British Biotech with companies with complementary strengths."

Compounding the failure to find an M&A partner, British Biotech has been running in place on the product front. The portfolio currently consists of four drugs in clinical development, the same as this time last year, following two failures, with E21R and a coated stent. E21R, licensed from the Australian company BresaGen Ltd., was discontinued when British Biotech generated new preclinical data that failed to support the rationale for developing the product, even though it had progressed to Phase II trials for the treatment of acute myeloid leukemia.

Hampson commented, "The combination of weak stock markets and the long-term capital-intensive nature of drug development, during which the majority of products fail, has resulted in biotech companies with early stage portfolios being viewed as unattractive by investors. This is true of British Biotech today, as shown by Friday's share price of 4.5 pence." He added, "I sympathize with all shareholders for the losses you have suffered."

Goldstein was recruited from then-SmithKlineBeecham plc in August 1998, to take over from founding CEO Keith McCullagh, after a series of problems, including the failure of Zacutex in the treatment of acute pancreatitis, a row over the unblinding of clinical trials and accusations of improper share dealings.

Goldstein succeeded in licensing the lead product marimastat, an oral treatment for cancer, to Schering-Plough Corp., for $60 million in September 1999, but subsequently the product failed. He also restructured the company, reducing the annual cash burn from £51 million in 1997 to about £15 million now, and tried to capitalize on the company's history of failed clinical trials by presenting it to potential partners as a biotech company with extensive clinical development expertise.

This led to a number of in-licensing deals for products in clinical development, but to date none of those has progressed beyond Phase II. British Biotech's lead product, BB-10153, to prevent and dissolve blood clots, recently entered Phase II.

Meanwhile, last week British Biotech announced that its research agreement with the Swiss biotechnology company Serono SA, in the use of metalloenzyme inhibitors in the treatment of inflammatory disease, is to be extended for a further year. The collaboration, formed in October 2000, has identified inhibitors that show activity against three targets involved in inflammation. The aim of the third year's work is to optimize the inhibitors to produce orally available compounds for clinical development.