WEDNESDAY 31 MARCH 1999

DR PHILIP GOULD

  20. You joined the company in January last year?
  (Dr Gould) Yes.

  21. Mr Travers left in June. Was it not apparent to you in your first six months in the company? Why did you mount a separate exercise between the June and the November?
  (Dr Gould) Perhaps you misunderstood in that it was not a separate exercise. The process really started around about February of 1998. It really accelerated as I got the experienced team together to do that during the second half of 1998 and it really crystallised with strategy plans that we approved in November 1998.

  22. But it does strike me here that there are two parts to this crisis last year when Mr Travers left for a complexity of reasons, as it were. It is as if then the remaining people took the opportunity to have a root and branch re-investigation of where this company is at and then between June and the end of the year that root and branch re-investigation took place with all these disappointing results.
  (Dr Gould) It was not like that. It was essentially that the R&D review of all programmes progressed from February but Mr Travers' going in June was for other reasons. It certainly caused a turbulent time for the company during that summer period.

  23. Was it simply for other reasons? Compared to the loss of shareholders' confidence was there some indication in the minds of these shareholders anyway that the projects were not all they were cracked up to be?
  (Dr Gould) Frankly, no, I think the reasons regarding Mr Travers' departure from the company are reasonably well documented and they were connected with other factors than the programmes.

  24. There was not something fundamentally wrong?
  (Dr Gould) I do not believe so and I do not believe there is something fundamentally wrong now. We have to recognise that it was essentially a backward audit of programmes that we had to ensure that we had security in these programmes to lead through to clear conclusions in our product development pipeline.

  25. In his submission to this Committee Dr Flynn has told us that he was concerned in autumn 1998 that there was a lack of clarity in the market concerning the company's time-frame for product registration and approval. Do you agree that there was lack of clarity and what was its cause?
  (Dr Gould) I do not agree that there was a lack of clarity. I believe that it was very clear we could not commit to any time frames to the market because we did not have programmes and strategies to programmes that would deliver time frames that we could feel confident enough to commit to the market at that time. I think you will see from the presentation that we gave analysts a week or two ago, all the review processes are now complete and we have committed to time frames and targets. In October, because of the concern I had in terms of the review process, we could not commit to time frames.

  26. Can we move on to Dr Flynn's resignation on 30 November 1998. We have received a memo from Dr Flynn where he tells us he was informed by your Chairman and separately by another non executive director that his personal integrity and professional competence were not issues in the board's decision to ask him to step down. Do you agree that those factors were not issues?
  (Dr Gould) It is very difficult to comment for a number of reasons. I was not on the board until essentially early December 1998. I was not party to the board dialogue and board decisions that occurred in the end of November 1998. Therefore, on the basis of that I do not know what was said, the context of what was said and how it was discussed. Sorry, I cannot be very helpful there.

  27. From what you do know, do you believe the main reason for Dr Flynn's resignation was the difference of opinion regarding the progress of products?
  (Dr Gould) I can surmise that that must have been one of the reasons; I do not know whether it was the complete picture.

  28. You are now the Chief Executive; you have not gone into the history of that?
  (Dr Gould) I did not think it was right that I did go into the history of that frankly. It happened. I was not party to those discussions. I do not know how it was presented. I do not know the context. With hindsight, one can say that one can surmise that must have been a significant reason but I was not there at the time, I am sorry I cannot be any more helpful than that.

  29. Were there any written records of the decision that you had access to?
  (Dr Gould) No. To the best of my knowledge I would imagine—I have never seen it—there must have been a note of the board discussions with the non executive directors that occurred at the end of November 1998, that was conducted by the Chairman at the time but I have never seen anything and I have never looked frankly.

  30. Cortecs on 1 December 1998 issued a press release which, in Dr Flynn's submission to us, is said to have a "... negative innuendo that ..." Dr Flynn "... failed to communicate information of which he had been aware to the board...". Do you agree with that?
  (Dr Gould) I did not agree with that. I fail to see that innuendo frankly.

  31. You do not think it was there?
  (Dr Gould) I was obviously party, as was a group of people, to writing that press statement. I could not see it there.

  32. The press release states this: "It has become evident that two of the three lead programmes are not as advanced as has previously been indicated". So indicated by whom: the board, the Executive Group or the City? To whom does "indicated" refer?
  (Dr Gould) That was a press statement; therefore it goes out into the public domain and it is conducted by the company. The board essentially runs the company so I would take that to be the board.

  33. The board had indicated that it had become evident that "... two of the three lead programmes are not as advanced as has previously been indicated". So the board had been indicating that they were more advanced than they were?
  (Dr Gould) Yes. That is correct. Therefore that goes back to the information that was passed to the board, the overview that was given to the board, the assessment of programmes and risks that were given to the board at that time.

  34. You are suggesting that Dr Flynn then, who would have given that sort of appreciation, had given an over-optimistic assessment? Where would that board have got that information from if not from Dr Flynn?
  (Dr Gould) As I mentioned before, I was not on the board at that time and therefore the scientific progress of the company was reported to the board through the Chief Scientific Officer, who was Dr Flynn, therefore you do have a connection. The word I am not sure about is in terms of what you mean by "innuendo". Perhaps I am misunderstanding the question.

  35. The innuendo is that Dr Flynn had failed to communicate information to the board. In other words, what you are saying is the board had put out information which was over-optimistic and the implication of that was that Dr Flynn, in your submission, had given the board information on these things that had brought them to a conclusion which was too sanguine about the prospects?
  (Dr Gould) The information that was passed to the board and communicated to the board was passed through Dr Flynn to the board. He sat on the board, I did not. The conclusion that the board came to was that the picture that was presented from the strategic review was different from the information they had received previously.

  36. What I am saying is who gave them the information previously?
  (Dr Gould) Dr Flynn I presume.

  37. Did you not speak to Dr Flynn yourself? Did you two not talk to each other?
  (Dr Gould) We spoke very frequently but I did not sit on the board. I do not know how the information was presented. I do not know how the context was presented. I do not know how the risks and the security of the information was presented. The actual broad facts were presented regularly to the board through Dr Flynn.

  38. In that case who was responsible for determining the contents of this press release?
  (Dr Gould) The contents of that press release?

  39. Authorising its release in the form that it finally appeared, who was responsible for that?
  (Dr Gould) I was made Chief Executive on that day and I have to take responsibility for that.