MoneyScotia collapses into bickering
The arguments get personal as trading in biotech firm's shares is haltedIn the ancient Scottish town of Stirling recriminations have begun over the collapse of Scotia Holdings, one of Britain's oldest biotechnology companies. Trading in Scotia's shares was suspended on Wednesday, after a three-year tailspin in the business's value from £550m to £16m. Within 24 hours, the firm's founder, David Horrobin, was pointing the finger of blame at his successor, the "ultra-abrasive" chief executive Robert Dow.
Dr Horrobin left Scotia two years ago. He now runs a psychiatric research business, Laxdale, based just a couple of miles from Scotia, on the outskirts of Stirling. He said yesterday: "I've refrained from commenting to the press until now because Dow has basically been going around slagging me off. I felt life was too short to get involved, but now I want people to understand the true story."
A former professor at a Canadian university, Dr Horrobin established Scotia's predecessor, Efamol, with his wife, Sherri Clarkson, in 1979. It initially concentrated on natural products - Dr Horrobin had identified evening primrose oil as a potentially useful treatment for eczema after trying it on the son of a librarian from his college.
Using profits from nutritional products, Dr Horrobin wanted to research lipids - the fatty molecules he suspected were key to the development and treatment of disease. Scotia floated in 1993 and had considerable initial success - several products obtained regulatory approval, including eczema drug Epogam, breast pain treatment Efamast and Efalith, for dandruff.
Things began to go wrong three years ago, when the Medicines Control Agency turned down Tarabetic, a much-hyped medicine for the nerve damage caused by diabetes. The market wiped £190m off Scotia's value in a day, and critics began sniping that Scotia was woolly, sprawling and lacking in focus.
Dr Horrobin was considered too fond of "hippy" projects such as primrose oil. The City questioned why his wife, whose most advanced qualification was a BA in English and women's studies, was in charge of Scotia's drug discovery division.
The couple stepped down in 1998, although whether they were pushed remains in dispute. Robert Dow, a sharp-suited former executive at Swiss drugs firm Roche, became chief executive, and immediately imposed his own style.
Mr Dow maintains that when he arrived, the business was in disarray. The only way he could raise money was through a £50m convertible debt issue - which cast a shadow over the shares - and he was forced to slash 170 jobs.
He axed 23 of the firm's 28 development projects and concentrated on cancer drugs. His best hope was Foscan, a light-activated treatment which showed dramatic effects in trials.
In a catastrophic blow, however, Scotia development partner Boehringer Ingelheim pulled out of a deal to collaborate on Foscan, citing "other priorities".
Dr Horrobin pinpoints this as the moment when Scotia was doomed, claiming the German firm pulled out because Mr Dow had sacked all the scientists working on the project: "The loss of Boehringer was a fundamental blow and he was responsible for it.
"As a result, Foscan has been developed for the last two years by people who don't understand the product."
Dr Horrobin was so incensed that he made an unsuccessful attempt to regain his position in a boardroom coup.
Mr Dow disagrees - he says his personnel changes were irrelevant. "Boehringer were deeply disturbed about the financial position of Scotia. They were very fearful we'd go into liquidation."
Scotia never found an alternative partner. The Scottish company could only afford the bare minimum of clinical trials, which American and European regulators decided were inadequate.
Disastrous decisions
Dr Horrobin claims Scotia's management made other disastrous decisions. He says Mr Dow decided against launching promising new versions of Efamast and Efalith - although Mr Dow maintains that this was in the hands of Searle, the group's development partner.
Dr Horrobin also alleges that Olibra, a weight-loss ingredient for yoghurts and other foods, has been wasted by a decision to put it in the hands of US foods firm General Mills - which, after two years, has launched nothing using Olibra. Mr Dow says the project is still on track.
"For Dow to say Scotia was in a mess when he arrived is simply not credible," says Horrobin. "He had the deep pockets of big pharmaceuticals firms behind him."
Mr Dow expresses fundamental scepticism about the lipid-based technology on which Scotia was based. He also points out that failure is hardly unusual - for every drug launched by the pharmaceuticals industry, thousands fail.
"I wish David Horrobin would stop taking it so personally," he says. "He's a very proud man and he made many useful scientific suggestions. He feels his reputation is damaged if those hypotheses don't generate commercial value, but I don't think that's the case."
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