Market Report: Proteome drops on worry it may need new funds

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The Independent Online

Concerns that Proteome Sciences will soon have to carry out a major fund raising sent investors rushing to exit the biotech group yesterday. The worry was prompted by a note from Evolution Securities which highlighted just how tight cash is at the company.

Concerns that Proteome Sciences will soon have to carry out a major fund raising sent investors rushing to exit the biotech group yesterday. The worry was prompted by a note from Evolution Securities which highlighted just how tight cash is at the company.

Back in August of last year Proteome promised the market that it would sign at least five deals for its various products over the coming 12 months. We are now halfway through this period and the company has failed to reach a single agreement. This failure leaves its cash resources serious depleted. When Proteome made its promise it had £4.3m in the bank but with a burn rate of £4m per annum it has until the middle of this year to either make some major deals or to return to the City in search of extra capital.

Evolution estimates that at present the group probably has about £1.5m of cash left and as a result warned investors that "some form of fund raising is likely in the near future from Proteome". It predicts that even if Proteome does succeed in securing licensing deals for its various products, and its share price rises in response, the biotech group will most probably take the opportunity to strengthen its balance sheet anyway.

Hence, shares in the group closed 5p lower at 69.5p as Evolution urged investors to reduce their exposure to the company. The broker set a 70p price target on the stock but warned that if the company has made no progress by the end of April "a substantial further reduction will be warranted".

Meanwhile, "hot money" flowed into EMI, which went 2.75p higher at 239.5p. Dealing rooms were awash with rumours that the music group could soon find itself on the receiving end of a takeover approach. Analysts believe there are two possible bidders: either a private equity house or Warner Music. They proposed that one way a financial buyer could raise the substantial amount of the cash required to win EMI would be by securitising the music group's back catalogue.

As for a move on EMI by Warner Music, analysts warned that the US group is likely to face substantial regulatory hurdles. Although competition authorities approved the merger of Sony and Germany's BMG, a tie-up between EMI and Warner could prove to be a bridge too far.

Cable & Wireless rose 3.25p to 133.25p thanks to upbeat comments from Cazenove. The heavyweight broker is excited by the fact that C&W has restarted its share buy-back programme. It noted that back in November the telecoms group promised to buy back £250m in the 12 months ahead. So far it has bought just £29m worth of stock so C&W has a lot to do. The FTSE 100 rose 17 points to 5,058 while the FTSE 250 retreated 6 to 7,363.

SABMiller fell 9p to 816p on rumours that the brewing giant is about to make a major acquisition in Russia. According to gossips, SAB is considering a move on regional brewer Krasny Vostok, which is said to control about 7 per cent of the Russian market. An alternative story suggested that SAB may merely take a large stake in the privately owned group.

Emblaze added 2p to 240p on talk the group will be unveiling major new product at this week's telecoms conference in Cannes. Emblaze earlier this month floated its Adamind multimedia division and investors should not be surprised to see the company hive off some of its other units in the months ahead. Word has it the technology group has already appointed an investment bank to float its defence operations.

In the world of small caps, Westmount Energy improved 1.5p to 99p on hopes it will soon announce a special dividend to shareholders. The company has made good money from asset disposal of late, among them £8m from the sale of its shareholding in Fusion Oil & Gas. Primary Health Properties added 11.5p to 325p after Patrick Pietroni, a non-executive director, disclosed the purchase of 16,000 shares.

Vislink soared 4.25p to 32.5p on news of a $30m contract win in the US. Central African Mining added 0.75p to 13p on rumours the exploration group is close to securing a sizeable coal concession in Mozambique

Ottakar's dropped 14p to 281.5p after disclosing that it has parted company with three non-board directors. Talk of poor trading at the book seller also surrounded the stock. Ottakar's issued a profits warning at the start of January and word has it business has not improved much since then.

Finally, punters would do well to keep an eye on La Tasca today. The Spanish restaurant operator is due to float at 110p a share, at which price it is expected to raise £20m. Brokers expect the stock to be a strong performer in its maiden session.

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