Fraud inquiry at pioneering biotech firm
Allegations made over £2.5m of company funds
SFO confirms it is investigating Merlin

The Serious Fraud Office is investigating allegations that a large sum of money has been misappropriated from Merlin Biosciences, the biotechnology investment fund run by the high-profile entrepreneur Sir Christopher Evans.
It is understood that a senior former employee, who left Merlin in acrimonious circumstances, has made claims to the SFO that about £2.5m was diverted from company funds, prompting raids at premises associated with the company.
Rumours about the allegations have swept the bioscience industry and are likely to embarrass Sir Christopher, a Labour donor who has advised the government on science strategy and has most recently been involved in setting up a charitable foundation to boost stem cell research in this country. His wealth is put at £148m, based on his previous share sales and the value of assets he owns.
The SFO does not normally get involved in fraud investigations if the amounts concerned are less than £1m or if the case is not a matter of public interest.
"I can confirm that the SFO is conducting an investigation into the affairs of Merlin Biosciences and therefore it is inappropriate to comment any further at this stage," said a spokesman for the government department.
A spokesman for Merlin would not comment on whether raids had taken place at the premises of the company or any of its directors, nor whether the sum concerned was £2.5m.
"Merlin is working with the SFO on a preliminary inquiry concerning an investment made by one of its funds. Other than to say Merlin is providing full cooperation and support to the SFO, it is inappropriate to comment further at this time," said a spokesman for the company. "In the meantime, the three funds managed by Merlin Biosciences continue to perform well."
Rumours have circulated for several weeks about the inquiry and were reported in the press over the weekend. However what initially appeared to be an investigation that was at a very early stage now appears more advanced.
The complex nature of fraud inquiries means that investigations can go on for years without charges ever being brought. The SFO has come under fire for a poor rate of convictions in the past, and for its handling of certain cases. Earlier this year, fraud charges against former directors of the health product company SSL International were thrown out by a judge, and the handling of a court case involving alleged irregularities at the DIY chain Wickes was criticised.
Sir Christopher, 47, has become one of the most high-profile businessman in the tricky investment area of biosciences after founding Merlin in 1996. By raising funds from investors he has supported a number of small, innovative bioscience companies. Most recently one of his long-standing investments, ReNeuron, which is developing stem cell-based therapies for people paralysed by a stroke, raised money on the stock exchange.
His portfolio of investments reads like a biotech sector overview in this country; he has invested in 35 companies and has capital of more than €450m (£305m). The investments range from the sexual health company Plethora Solutions, the cancer drug developer Ark Therapeutics, and the drug reviver Arakis to earlier stage investments such as Santhera Pharmaceuticals, which is looking for treatments for neuromuscular conditions and metabolic diseases such as diabetes.
However, the ebullient nature of Sir Christopher, who is the son of a steelworker, plus his willingness to talk publicly and get involved in politics, has sometimes raised eyebrows in the relatively sedate and academic world of biotechnology in Britain.
An Imperial College graduate who obtained a PhD from the University of Hull, Sir Christopher made his name at the molecular structure company Chiroscience when he sold it to the larger British biotech Celltech with a valuation of about £200m in 1999. He then set up Merlin, using his scientific expertise to invest on behalf of City companies.
Investing in biotech companies is notoriously difficult. One of Merlin's investments, hair loss-treatment maker Intercytex, recently had to postpone a flotation due to difficult market conditions. Other biotechnology companies have found it difficult to raise funds on the public markets. Some, such as Merlin's vaccine firm Microscience, have been forced to sell to larger biotechnology companies in return for shares rather than cash.

Heather Tomlinson