TROUBLED drug development firm British Biotech is making more than 40 people redundant - as the firm's chief executive announced his resignation.

Keith McCullagh, the chief executive of the Oxford company, will step down at the firm's annual meeting on September 23.

His move comes in the wake of a huge row surrounding the company, including allegations that it had been over-optimistic about the progress of some of its trial drugs.

The company said 42 people would be made redundant as a result of the company's failure to gain regulatory approval of Zacutex - a drug aimed at treating acute pancreatitis.

A spokesman said the jobs would mostly come from marketing support staff, recruited to carry out "pre-marketing" before the company gained approval for the drug.

He added the company would now be made up of 90 per cent research and development staff.

Allegations of over-optimistic announcements from British Biotech - some of which centred around Zacutex - were levelled against the company by Dr Andrew Millar, sacked in April as head of clinical trials. Before Dr McCullagh announced his impending resignation, the company issued a wide ranging rebuttal of Dr Millar's allegations.

In a comprehensive 30-page circular to shareholders, chairman John Raisman said allegations of inappropriate share dealings, misleading of shareholders and problems in the company's future products had been proved to be unfounded.

He warned fresh allegations might still be made in the future, but said the company might not bother to respond to them.

He said: "The board doubts that it will be in the interests of the company to devote substantial management resources to further rebuttals of any such allegations.

"Shareholders should be comforted by the fact that the company has throughout acted in good faith in the interests of its shareholders and without any impropriety."

He said Mercury Asset Management, largest shareholder in the company, had confirmed its support for the company's strategy.

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