UNITED STATES OF AMERICA
|In the Matter of
BRITISH BIOTECH PLC,
|ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT
TO SECTION 21C OF THE
SECURITIES EXCHANGE ACT
OF 1934, MAKING FINDINGS AND
ORDER OF THE COMMISSION
The Securities and Exchange Commission ("Commission") deems it appropriate that public cease-and-desist proceedings be instituted pursuant to Section 21C of the Securities Exchange Act of 1934 ("Exchange Act") against British Biotech PLC ("British Biotech"or the"Company"),Keith McCullagh ("McCullagh"), Peter Lewis ("Lewis") and James Noble ("Noble")(collectively, "Respondents").
In anticipation of the institution of these administrative proceedings, the Respondents have submitted Offers of Settlement ("Offers") to the Commission,which the Commission has determined to accept. Solely for the purpose of these proceedings and any other proceedings brought by or on behalf of the Commission or in which the Commission is a party, and without admitting or denying the findings contained herein, except for those set forth below in Section II., paragraphs A.1.-A.4., which are admitted, and prior to a hearing pursuant to the Commission's Rules of Practice, 17 C.F.R. §201.1 et seq., Respondents consent to the entry of the findings and he imposition of the order set forth below.
Accordingly, IT IS ORDERED that proceedings pursuant to Section 21C be, and hereby are, instituted.
On the basis of this Order Instituting Cease-and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making Findings and Order of the Commission and the Offers submitted by the Respondents, the Commission makes the following findings:
1.British Biotech PLCis a British pharmaceutical research and development company headquartered in Oxford, England. At all relevant times, British Biotech's stock, in the form of American Depository Receipts ("ADR") was registered with the Commission pursuant to Section 12(g) of the Exchange Act as a foreign private issuer, and traded on the National Association of Securities Dealers Automated Quotation System. British Biotech is a "foreign private issuer" as defined under Rule 3b-4 of the Exchange Act. As a foreign private issuer, British Biotech is required to file annual and current reports pursuant to Section 13(a) of the Exchange Act, and Rules 13a-1 and 13a-16 thereunder. Pursuant to these rules, British Biotech files Forms 6-K periodically and Forms 20-F annually.
2.Keith McCullagh, age 55, was the Chief Executive Officer of British Biotech from the companys inception in 1986 to September 1998. During all relevant times, McCullagh also was the Chairman of the Board of Directors of British Biotech, Inc., an American subsidiary. [ British Biotech, Inc. is a Maryland corporation that conducts clinical research for British Biotech. ] He resides in the United Kingdom.
3.Peter Lewis, age 54, was the Director of Research and Development and an Executive Director of British Biotech from March 1992 until June 1997. He is a resident of the United Kingdom.
4.James Noble, age 39, was the Finance Director (a position essentially equivalent to the Chief Financial Officer of a United States Corporation) of British Biotech from January 1990 until February 1997. He is a resident of the United Kingdom.
During the period from November 30, 1995 through October 1996, British Biotech, through the actions of McCullagh, Lewis and Noble, made materially misleading statements in reports it filed with the Commission on Forms 6-K and Form 20-F, including statements that British Biotech had made in press releases it had issuedto the public that were made part of these reports. The misleading statements concerned the progress that marimastat, a British Biotech pharmaceutical product, was showing in clinical trials involving the treatment of different types of cancer. In these statements, British Biotech claimed that marimastat was showing positive results in the clinical trials, primarily based upon data indicating that marimastat was reducing the level of cancer antigens, which British Biotech claimed are used as surrogate markers of tumor progression. [ An antigen is a protein that can be measured in a patientís blood.] The company failed to disclose, however, that from the beginning of the clinical trials, the United States Food and Drug Administration ("FDA"), had repeatedly informed the company that cancer antigen data could not be used to support a claim of efficacy sufficientto obtain FDA marketing approval.
2.Development of Marimastat to Treat Cancer
Before a company can conduct clinical (human) testing of a drug in the United States, it must submit an Investigational New Drug Application ("IND") to the FDA seeking approval to begin testing in humans. An IND must be accompanied by a protocol, a written plan for each study that provides certain information about the proposed study such as its parameters and objectives. FDA regulations generallyrequire a company to conduct three phases of clinical testing to determine the safety and efficacy of a drug, defined in FDA regulations as Phase I, Phase II and Phase III studies. The initial tests, Phase I and II studies, are conducted primarily to determine the safety of the drug, appropriate dosage levels, and to obtain initial evidence of the drugs efficacy. After the successful conclusion of these initial studies, large-scale clinical trials, Phase III studies, must be conducted to definitively establish the safety and efficacy of a drug. After the completion of successful Phase III studies, a company can submit an application to the FDA seeking approval to market the drug.
On January 31, 1995, British Biotech, through its United States subsidiary,British Biotech, Inc., submitted an IND and an accompanying protocol to the FDA seeking permission to begin conducting clinical testing of its drug marimastat to treat ovarian cancer. In its IND, British Biotech informed the FDA that it believed marimastat worked by inhibiting the growth and spread of cancerous tumors. British Biotech informed the FDA that the purpose of the study was to find the minimal effective dose of marimastat by using cancer antigens as surrogate markers of tumor progression. [ Certain antigens have been associated with particular cancer types. Prior to the marimastat trials, however, no company had attempted to use antigen levels as the measurement in a clinical trial to establish a minimum effective dose. ] That is, British Biotech intended to establish the minimum dosage at which marimastat effectively stabilized or reduced cancer antigen levels, with the assumption that the rate of increase in cancer antigen levels bore some relationship to the growth of the cancerous tumor. In its communications with the FDA, the Company indicated that the definitive trials that would follow those that measured cancer antigen levels would rely on traditional markers of efficacy such as mortality rates and the measurement of tumor size by X-rays or CT scan.
3.FDA Communications with British Biotech
In response to the IND, the FDA informed British Biotech in March 1995 that it could proceed with its trials, but only after it revised the protocol to address certain comments and deficiencies noted by the FDA. Among the most serious of the deficiencies was British Biotechs use of cancer antigens to measure the efficacy of marimastat. Specifically, the FDA told British Biotech that cancer antigens alone could not be used as surrogate markers for tumor progression and that, in order to demonstrate efficacy sufficient to obtain marketing approval, British Biotech would have to show a correlation between cancer antigen levels and more conventional endpoints (measurements of efficacy) such as the measurement of tumor size by radiographic responses (X-rays or CT Scan). The FDA further informed British Biotech that, without comparing cancer antigen levels to a conventional measurement of efficacy, an interpretation of antigen data to be gathered in the study would be "unintelligible."
In May 1995, the FDA reiterated its position on the use of cancer antigens, but allowed British Biotech to proceed with the study as designed. [ The FDA cannot stop the commencement of a clinical trial based upon problems in the protocol unless those problems pose a safety issue. The FDA did not find that such safety problems existed in the antigen studies. ] British Biotech later amended the IND to include studies for other cancers, including, among others, pancreatic, prostate, and colorectal. The FDA, however, continued to inform British Biotech that it did not accept the use of cancer antigens to demonstrate efficacy. The FDA also informed British Biotech that cancer antigen data could not be used to support any application to the FDA seeking permission to market marimastat for the treatment of cancer.
4.British Biotechs Commission Filings
During the period November 1995 through October 1996, British Biotech, through the actions of McCullagh, Lewis and Noble, made materially misleading statements in reports it filed with the Commissionon Forms 6-K and its 1996 Form 20-F, including statements that British Biotech had made in press releases it had issued to the public that were made part of these reports. The statements at issue concerned the progress of the marimastat clinical trials. British Biotech claimed that marimastat was showing effectiveness in the clinical trials, primarily based upon cancer antigen data, but did not disclose the FDAs consistent position that cancer antigens alone could not be used to establish efficacy, that to establish efficacy British Biotech would have to show a correlation between the antigen data and a more conventional endpoint such as the measurement of tumor size by X-ray, and that the antigen data could not be used to obtain FDA marketing approval of marimastat.
On December 12, 1995, the Company filed a Form 6-K with the Commission, which incorporated a press release British Biotech had issued on November 30, 1995. At various points throughout the ten-page press release, British Biotech created the misleading impression that marimastat was showing effectiveness in the clinical trials, primarily based upon cancer antigen data. For example, British Biotech claimed that marimastat "...has shown early evidence of activity in small-scale trials of advanced human cancer...[by showing]...a positive biological effect on blood concentrations of cancer specific antigens which are recognized as surrogate markers of tumor progression or regression." [ A "biological effect," as defined by British Biotech, is an absolute fall or no rise in cancer antigen levels after 28 days.] Despite repeated claims of this nature throughout the press release, British Biotech never disclosed the FDAs position on the utility of the cancer antigen data. [ After the November 30 release was issued, the price of British Biotechís ADRís per share equivalent increased from $17 3/4 on November 29, 1995 to $33 1/2 on November 30, 1995.]
On May 21, 1996, British Biotech issued a press release that purported to confirm the positive results of the marimastat clinical trials that the company had announced in November 1995. According to this twelve-page press release, "[p]ositive interim results presented in November 1995 have been confirmed in larger patient numbers." The reported results were primarily based upon cancer antigen data. Several months after the press release, the FDA (Division of Drug Marketing, Advertising and Communications) issued the company a Notice of Violation letter regarding the May 21 press release. In the letter, the FDA concluded that, in the May 21 press release, British Biotech had made premature and unsubstantiated claims of safety and efficacy, and that the press release was misleading due to, among other reasons, British Biotechs failure to disclose the FDAs position on antigen data. The FDA concluded that, as a result, "...the relevance of the positive cancer antigen data is vastly overstated." No further action was taken by the FDA or required of the company in response to the Notice of Violation letter.
British Biotech did not file the May 21, 1996 press release with the Commission as a report, but it repeated statements that it made in this press release and made other statements concerning the purported results being shown in marimastat clinical trials in Forms 6-K filed with the Commission on June 26, 1996, July 2, 1996, September 4, 1996, and October 18, 1996, and in its 1996 Form 20-F filed with the Commission on September 16, 1996. In none of these reports, however, did British Biotech disclose the FDAs position on the cancer antigen data. [ In these reports, British Biotech disclosed that, following the then on-going clinical trials, it intended to undertake definitive clinical trials which used traditional markers of efficacy such as mortality rates and the measurement of tumor size by X-rays or CT scan. ]
British Biotech did not disclose the FDAs position on cancer antigens until November 4, 1996, when it issued a press release that it filed with Commission as part of a Form 6-K on December 30, 1996. In this press release, British Biotech stated that "[a]ntigen data are not intended to be used as the basis for any potential licensing submission. Proof of efficacy must await the completion of randomized controlled Phase III trials which are now under way." Marimastat is currently in Phase III trials.
McCullagh, Lewis and Noble were among those who controlled the operations of British Biotech during the relevant time period. All British Biotech press releases, incorporated into Commission reports, were reviewed and approved by McCullagh, Lewis and Noble before release. The material omissions discussed above were contained in Form 20-F filed by British Biotech on September 16, 1996 and Forms 6-K filed with the Commission on December 12, 1995, March 11, 1996, June 26, 1996, July 2, 1996, September 4, 1996, and October 18, 1996. Noble signed all the relevant forms between November 1995 and October 1996, with the exception of the September 1996 Form 6-K,signed by McCullagh.
British Biotech, McCullagh, Lewis and Noble Violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 Thereunder
Issuers whose securities are registered with the Commission and traded in U.S. markets have a paramount obligation to provide full and timely disclosure of information required by the federal securities laws. Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-16 thereunder require foreign private issuers of registered securities to furnish to the Commission reports on Form 6-K and to file reports on Form 20-F. Finally, Rule 12b-20 of the Exchange Act requires that an issuer's periodic reports include any additional information "as may be necessary to make the required statements, in the light of the circumstances under which they are made, not misleading." 17 C.F.R. § 240.12b-20.
British Biotech violated Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder, by filing with the Commission its annual report on Form 20-F on September 16, 1996 and Forms 6-K on December 12, 1995, March 11, 1996, June 26, 1996, July 2, 1996, September 4, 1996, and, October 18, 1996, which contained statements made in press releases and other statements that failed to contain material information necessary to make the required statements, in the light of the circumstances under which they were made, not misleading. British Biotech, through the actions of McCullagh, Lewis and Noble, filed reports containing materially misleading statements concerning the results marimastat was showing in the clinical trials. In these reports, British Biotech claimed that marimastat was showing effectiveness in the clinical trials, primarily based upon the antigen data, but omitted to disclose the FDAs position that cancer antigens alone could not be used to establish efficacy, that to establish efficacy British Biotech would have to show a correlation between the antigen data and a more conventional endpoint such as the measurement of tumor size by X-ray, and that the antigen data could not be used to support FDA approval of marimastat.
McCullagh, Lewis and Noble, as officers of British Biotech, caused the Companys violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1 and 13a-16 thereunder, by causing British Biotech to file with the Commission inaccurate periodic reports that omitted to state material facts necessary to make the statements made therein not misleading.
In view of the foregoing, the Commission deems it appropriate and in the public interest to impose the cease-and-desist order specified in the Offers submitted by the Respondents and finds that Respondent British Biotech committed or caused the violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder, and that Respondents McCullagh, Lewis and Noble were a cause of the violations of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder committed by British Biotech.
Accordingly, IT IS HEREBY ORDERED, pursuant to Section 21C of the Exchange Act, that Respondent British Biotech cease-and-desist from committing or causing any violation and any future violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder; and
IT IS FURTHER ORDERED, pursuant to Section 21C of the Exchange Act that Respondents McCullagh, Lewis and Noble cease-and-desist from causing any violation and any future violation of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, and 13a-16 thereunder.
By the Commission.
Jonathan G. Katz
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