British Biotech came under fire again on Friday - this time for striking the wrong kind of partnership deal.

The company announced it would develop its antibiotics programme in collaboration with a little-known US gene research company, rather than the big pharmaceuticals group that Elliot Goldstein, chief executive, had led the market to expect.

Analysts and investors had been keen for Goldstein to find a collaborator to take forward its early-stage antibiotic, BB-83698. But they said the choice of Genesoft, a small private company based in San Francisco, was misguided.

"There had been a lot of pressure on the company to partner the antibiotic programme," said Richard Parkes at ING Barings Charterhouse. "But that's because people wanted validation from a big pharma partner. This deal doesn't do that."

Late last year, Goldstein said he hoped to team up with "a major antibiotics company". But yesterday he defended his change of tack. "We could have done a deal with big pharma. But we couldn't have retained the commercial rights.

"It used to be the case that the name of a partner gave you validation. But that's not true any more. Look at Bristol-Myers Squibb."

BMS's reputation was damaged recently after licensing a drug from a US biotechnology company which then failed to secure regulatory approval.

Under the Genesoft deal, the US company will pay British Biotech $4m (£2.5m) now and a further $1m in October, when the drug is due to enter clinical trials.

The BB-83698 collaboration with Genesoft is on a 50-50 basis. British Biotech said its annual cash burn would fall by £3m-£4m to about £15m as a result of the deal.

But analysts said the terms were unnecessarily generous. "British Biotech has given away half of this programme for virtually nothing," said one.

Neither company had the wherewithal to market the drug if it made it through the development process, so a further commercial partner would have to be recruited and further rights given away.

British Biotech and Genesoft will also collaborate in a research effort to find and develop other antibiotics from the same chemistry.

Last month, British Biotech axed a leukaemia treatment after disappointing clinical data. That came a day after some shareholders took the first step towards legal proceedings over the way its drug development news was disseminated in the mid-1990s.