Novartis's NeuTec Used Law Firm in Insider Case, Company Founder Testifies

NeuTec Pharma Plc, the biopharmaceutical company whose 2006 takeover by Novartis AG is at the heart of an insider-trading trial, employed the law firm where one of the defendants worked, a witness said.

NeuTec used McDermott Will & Emery LLP as advisers on patent disputes with Cambridge Antibody Technology Group Plc, NeuTec founder James Burnie testified. Michael McFall, one of three defendants, is a former mergers and acquisitions lawyer at McDermott. Andrew King, NeuTec’s ex-financial director, and Andrew Rimmington, a former partner at Dorsey & Whitney LLP are also on trial.

“You said that NeuTec received legal advice from McDermott Will & Emery, and this had come from a recommendation Andrew King had received through a contact,” prosecuting attorney Michael Bowes said to Burnie today at Southwark Crown Court.

Burnie, who is NeuTec’s chief executive, confirmed the statement to Bowes.

This is the fourth criminal insider-trading case filed by the U.K. Financial Services Authority to reach a jury trial. The regulator has won its first three cases. The crime carries a maximum of seven years in jail. The agency has pledged to be a tougher regulator in the face of criticism from opposition Conservatives who said they will carve up its powers if they win next month’s election.

The three men deny the eight charges and will present their defense later in a trial, which is scheduled to last six weeks. Bowes said yesterday that they made 39,000 pounds ($60,000) each in 2006 after King gave McFall early notice that Basel, Switzerland-based Novartis would buy NeuTec. McFall then passed on the information to Rimmington, the FSA alleges.

NeuTec, which is based in Manchester, England, rose 84 percent to 925 pence after it said on June 6, 2006, it was in talks with a potential buyer. Novartis said it was buying NeuTec for 10.50 pounds a share, or 305 million pounds in total, on June 7, 2006.

To contact the reporters on this story: Caroline Binham in London at cbinham@bloomberg.net

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