A roller-coaster ride has seen Oxford drug company British Biotech's fortunes lurch from flagship of the industry to its embarrassing black sheep.

The ride took another downward turn earlier this month with the announcement that 66 more people are to lose their jobs as the company tries desperately to turn its fortunes around.

When British Biotech first floated on the Stock Exchange in 1992, it was the flagship of the burgeoning biotechnology sector. Chief executive Keith McCullagh was soon appointed to a Government committee looking at ways to increase funding for technology companies. He announced his intention to make the Cowley firm one of the world's leading pharmaceutical businesses.

Eight years later, British Biotech needs to find annual savings of £10m by 2001 in an attempt to placate shareholders, who have seen their investment drop to little more than ten per cent of its value four years ago.

The boom came in 1996, when the company announced the early results from trials on anti-cancer drug marimastat. The stock market was impressed by the drug, which looked likely to be a major force in the fight against cancer. The share price soared to 280p. At one point, British Biotech was valued at £2bn.

But even then, some observers were asking how a company which had never made a profit and had no product on the market could be worth so much.

The share price was always volatile, but it plummeted in April last year, when clinical research director Dr Andrew Millar went to one of the leading shareholders, Perpetual, with concerns about drug trials. His bosses took exception and Dr Millar was fired. He went public, accusing his former employers of misleading the market about the prospects for its research. The share price hit 15p.

The company was rapped by US and London stock market regulators, and paid Dr Millar an undisclosed sum - believed to be more than £100,000 - after a legal battle.

Now the firm says its cost-cutting measures will soon start to reap savings. Dr McCullagh has been replaced by Dr Elliot Goldstein, and pre-tax losses for the year to April 30 were cut to £39.8m, down from £44.9m last year. Now the company which once said it would keep all its profits has a powerful backer, with a licensing deal for marimastat with US giant Schering-Plough.

If all goes according to plan, British Biotech will earn £37.5m in up-front and milestone payments. Schering-Plough will take the profits, paying royalties to British Biotech.

Marimastat - potentially a blockbuster drug - is being tried out on cancer patients in several centres. But with the last clinical trial not due to end until 2002, it could be some time before investors know if they are on to a winner.

Story date: Friday 22 October

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.