WEDNESDAY 31 MARCH 1999

DR PHILIP GOULD

  1. Dr Gould, thank you very much indeed for coming along this afternoon to join the Select Committee on Science and Technology and help us to better understand the goings on at Cortecs over this last several months. We have, of course, read the evidence you have submitted to us and the evidence of others. I wonder if I could ask you, almost by way of introduction, although we very much welcome perhaps a few brief words from you about yourself before we go on to ask the questions but by way of introduction, if you could briefly outline for us the events within your company from June of last year when there were executive resignations through to November, when there was the resignation of the Acting Chief Executive, on to the present time. Could you please, as I say, introduce yourself and then tackle that question.
  (Dr Gould) Yes, thank you, Chairman. Good afternoon everybody. My name is Philip Gould. I am the Chief Executive of Cortecs plc which is a relatively small biotechnology company. I know from my memorandum I have given you a history of the company. I joined the company in January 1998 following a career for over 20 years in large pharmaceutical industry companies. Normally in jargon we call that "big pharma". I have worked for large companies, both American based and British based. Originally I was trained in chemistry—physical chemistry. Also, I hold an honourary professorship of Health Sciences at Liverpool's John Moore University. I came into Cortecs in January 1998 as Director of R&D and my role there essentially was to command and conduct the R&D programmes for Cortecs with the emphasis being on the company being "in late stage development" ready for final registration—ready for manufacturing, ready for commercialisation of the products that Cortecs had in development. During the course of 1998, as I became familiar with the programmes, the people, the science, in some areas the background data, it became evident that in fact to pull all these pieces of information together for regulatory submission there was an awful lot to do. I reviewed things and recognised that there were areas of omission in terms of the data and set about conducting a review exercise which progressed through 1998. Events overtook themselves in June 1998—

  2. I am sorry to interrupt you, Dr Gould, I am sure you told me, maybe I was not concentrating, what position did you have when you joined in January 1998?
  (Dr Gould) I was Director of R&D. In June 1998 the shareholders of Cortecs lost faith in the Chairman of Cortecs who was the original founder, Mr Travers, and that was the first upheaval of 1998 where Mr Travers left the company. Dr Flynn, who was the Chief Scientific Officer, became the Acting Chief Executive and Lord Patten, who was on the board at that time but had only just joined the board, became Non Executive Chairman. That takes you up to about the middle of 1998. Events at Cortecs progressed through from June 1998 to November 1998 with Dr Flynn being the Acting Chief Executive and Chief Scientific Officer and myself in the role of Group R&D Director. The review process that I had underway continued through that time and eventually led to conclusions on projects which related to our product development programmes; that concluded with strategy sessions in November 1998. That led to events in which information was taken to the board and from that Dr Flynn left the company and I was asked to become Chief Executive.

  3. Do you think the troubles that your company went through at that time were troubles of science, personality clashes or various aspects of financial difficulties?
  (Dr Gould) I think, Chairman, it was a mixture of all those things in different ways. Clearly through the early part of 1998 the shareholding community, we were advised through investors, had lost faith in terms of Mr Travers as Chairman of the company, and it was becoming difficult to raise capital finance, which is essential for our industry in terms of moving the company forward. The events crystallised, I think, towards the second half of 1998 in terms of the programmes and this then led to areas of difficulties in terms of certain individuals working together.

  4. Thank you very much. Now from the evidence you gave us—and I thank you for that—you state that in November 1998—quoting from your evidence—"... during assembly of the final review positions..." to use your own expression it became apparent "... that considerable differences of opinion regarding the position of the programmes existed ..." between Dr Flynn and the Company Executive Committee. I would like to ask you what in your opinion led to those differences? Was it a difference of interpretation between Dr Flynn and the Company Executive Committee or was it the fact that those concerned had access to different information?
  (Dr Gould) Let me just explain the Company Executive Committee was essentially made up of the other senior directors of Cortecs plc and that included essentially the Finance Director, myself, a director that looked after manufacturing, a director that looked after commercial development, as well as Dr Flynn. In essence, as the review programme went through 1998, crystallised positions came from structured strategic reviews and from assessment of the data that we had on file to support the progress of the products. In terms of what then happened in terms of the views that were taken, it became apparent as we went through the strategy process and looked at the data we had, the information that was available and had gone out into the public domain, we concluded that two of our programmes had not progressed as far in terms of development as had been publicly stated.

  5. Which were those?
  (Dr Gould) Those programmes were as indicated in the press announcements and they related to Macritonin, which was our oral calcitonin product, and Pseudostat, an oral vaccine for cystic fibrosis.

  6. My final question before we go to Dr Kumar is that we understand there were status sheets that were prepared on the basis of internal facts within the company and these were compared with external perceptions. Was this because there was information within the company that had not been reported publicly and what was the reason for comparing some internal fact with an external perception? It seems more of a political dodge than a scientific one?
  (Dr Gould) I do not think it was a political dodge at all.

  7. I meant that against my own colleagues not against your company, Dr Gould.
  (Dr Gould) We would not have got into that. I think what we did was in the review process we looked at the individual components that led up to an end point. Science works, as you know, on that basis, that you structure a programme that leads in a rational way through a series of end points which leads to effectively an output. It was in that review process, that was conducted essentially in a large part by senior R&D heads, that we actually found that it was difficult to piece that picture together and that led to the outcomes that you have mentioned earlier. In terms of the status position, it was important to draw a very awkward and very difficult conclusion together to really confront the issue on behalf of the company—on behalf of the investors as well. Therefore, a picture was drawn up of where the collective view of the company's scientists was versus where in fact the external perception may be.

  Chairman: Okay. Dr Jones?

  8. Dr Gould, you said that when you joined the company you were told that products were in late stage development. Who told you that?
  (Dr Gould) I would say from discussions with the members of the company that interviewed me but moreover, when a company has products into registration, that is defined as late-stage development. When a company declares products in phase 2 ready for stage 3, which is the last stage for clinical development, that is geared to be late-stage development. The stages of development implied that the position was a late-stage development activity at least in the short term before we could address the issue of bringing the rest of the company pipeline together.

  9. So you came to that conclusion from information that was in the public domain or did any individual or individuals give you a impression that this was the case and who were they?
  (Dr Gould) At the process of interview for the company, that was conducted by a head hunter and Dr Flynn, as well as a picture about where the company was from the public domain.

  10. When you were in your new job did you see any objective evidence that justified those statements?
  (Dr Gould) I am sorry to repeat it but when a company has products in registration that is defined as late-stage development. As I sat there and tried to piece the picture together about what led from X to Y and from Y to Z onwards I kept making notes to say I need to find out where that piece of information is because I would like to understand this story. Overall, what was clear was that X, Y and Z had been put in place but perhaps Y had been jumped ahead and that a step had been missed out and that was a concern that raised itself to me about the very risky programme that was moving forward. I needed to investigate further what needed to be done to ensure a coherence and a rational process had been used in terms of the development of the drugs.

  11. Was there direct evidence of whether these were in phase 2 or phase 3? It is a fairly clear-cut division between the two, is it not?
  (Dr Gould) Yes, it is a clear-cut division between the two and therefore if you are in patients in late-stage clinical development certainly it will be in terms of "late-stage development".

  12. That was not really an answer to my question. My question was: when you were there did you have evidence from the regulator or from other sources that these two drugs were either late phase 2 or late phase 3 or into phase 3? You must have looked at it and seen whether the statements that had been made were in fact the case.
  (Dr Gould) I did look at it.

  13. What was your conclusion?
  (Dr Gould) And they were in late stages of development.

  14. So the statements were accurate?
  (Dr Gould) I go back to the definitions. They were in patients and they were towards the end of the development process. What I had to look at was not whether they were there but whether they were securely there and that was the aspect—

  15. What was missing? Phase 2?
  (Dr Gould) In terms of what needed to be there it was assessment of phase 2, for example what was the dose that was suitable to take into phase 3.

  16. You could not get your hands on that information?
  (Dr Gould) I struggled with that. I do not want to be evasive but I struggled. I recognised that in bio-tech and rapid development you sometimes have to make intuitive judgements but I struggled with understanding the rationale of how one step moved to another step within some of the programmes that I inherited.

  Dr Williams: These are rather extraordinary terms—"internal truth versus external perception". I do take the political analogy. We were voted in on certain promises and if we achieved one per cent of our promises, but these are your documents. Why was there this extraordinary external perception? Do you think people, prior to yourself, in the company had been misleading investors?

  17. Before you answer could you answer my question because it is so close to Dr William's question. I too am worried about exactly the same words as Dr Williams. In the worst case could it be that internally the internal truth was that a drug was failing or not performing or it was thought not to be performing and the external perception was that it was performing and the shares were holding up and investors were putting money in? That is the worst case scenario. Could it be as bad as that? Internally the company know something is failing, the external perception is that it is not and we know there are people taking action with their own or investors' money and they would not do so if the truth were known. It is a complementary question to Dr William's.
  (Dr Gould) I will try to answer both together. I think it goes back to the security of the information and the security of outcome. As one goes through a programme one likes to have signs that say we are on the right track and therefore one does at times in a very structured and orderly way conduct interim analyses on some of the data and with some of the patients just to check that as you are spending money you are on the right track and you get an output. You can draw conclusions from that and sometimes those conclusions may show the promise and sometimes they may not show the promise. That is a matter of judgement in terms of how you look at that and sometimes you can look at it with a glass half empty or a glass half full perspective. So therefore the promise can be essentially over-optimistically interpreted and sometimes a negative may not be the final negative but it may give you caution about moving forward in exactly the same sort of way. Drug development works like that. It is more acute in bio-tech drug development. These minutiae in the way the programmes move forward are always very visible and therefore that relates to how that information goes out to the market and how that information goes out to the market will influence investors.

  18. That information that went to the market was it systemically over optimistic?
  (Dr Gould) You could have a personal view on that. I believe that you can interpret things in a number of ways and you can over optimistically interpret what you have got that is crystalline to report. I was not in the company before 1998 and therefore I do not know what discussion or dialogue went on to respond during that time. I think in early 1998 there may have been that possibility.

  Chairman: Dr Gould, we have got an unexpected division and the standing orders of the select committees are that you must adjourn when there is a division. I hope you will bear with us if we adjourn for ten minutes and we will be back as soon as we possibly can. Thank you so much for your understanding.

  The Committee suspended from 16.32 to 16.40 for a division in the House

  19. I think we will start again now. Unfortunately, there could be another division within ten minutes. To recap, Dr Williams had asked you a question, I had asked you a supplementary, he was probing on the business of internal truth and external perception and I linked that to the possibility that there is an internal truth of something not being right with the drug but the external perception was that they were still pouring money into the company and you were part way through your answer.
  (Dr Gould) If I can recall where I got to. I was explaining the way that the process progresses and the assessment of process goes on as the process progresses with assessment of interim data, sometimes small cohorts of patients to check on the path that is being taken and you can interpret that objectively but it is a matter of judgement and it is a matter of whether you sometimes over-optimistically interpret where you are and where you have got to in the progress of programme. In terms of internal/external you can take a judgement about where you are internally and how that is received externally. Some of it is, frankly, a feature of the process which is where I got to in terms of bio-tech companies. If it has got one or two or three programmes, that is very different from the large pharmaceutical company which has many programmes, and small pieces of information are of keen interest and that does influence the analysts and the people buying the stock.