Small Talk: Signs point to Vernalis as OXB's mystery suitor

<preform>Emerging floats; Stock-pickers' guide; M&B to the rescue; Diesel firm splutters</preform>
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The Independent Online

There's nothing like the admission of bid talks to pep up a stagnant share price, and Oxford BioMedica, a gene therapy company with a couple of cancer drugs in the pipeline, was last week's best-performing small-cap share after admitting it had received "an approach".

There's nothing like the admission of bid talks to pep up a stagnant share price, and Oxford BioMedica, a gene therapy company with a couple of cancer drugs in the pipeline, was last week's best-performing small-cap share after admitting it had received "an approach".

The public statement was forced on the company after speculators got whiff that something was up and piled into the stock. Wild talk on the bulletin boards is still predicting a 30p-per-share cash bid from a large pharmaceutical company or a much bigger biotech specialist from continental Europe or the US - despite the fact that OXB's statement referred to the possible deal as a "merger".

Bulls reckon the word merger is a face-saver, often employed by small companies who are being taken over, but Small Talk hears that the word was chosen very carefully. The shares, at 22.75p, look vulnerable if the reality turns out to be a mundane all-share combination with a not-much-bigger biotech close to home.

Which is why Small Talk is worried (for the speculators) that the approach might have come from Vernalis, the former British Biotech, which is back on the acquisition trail after sorting out marketing problems with its main drug last year. The company won't rule itself in or out as the bidder, but the respected analysts at Evolution Securities, adding their own "fuel to the bonfire of speculation", have come to the same guess.

Vernalis, chaired by Peter Fellner, has grand plans to consolidate a UK biotech sector that is still characterised by sub-scale players with too few drugs, too little money and too-high losses. OXB's cancer products would bolster Vernalis's own pipeline in this area, but there is also a useful fit between OXB's more experimental work in Parkinson's disease and the Vernalis pipeline in neurology.

Vernalis itself is optimistic about 2005, since it recently signed a new marketing partner for its migraine drug, Frova.

Emerging floats

Coming Soon 1: Some of last year's most successful flotations were in the technology hardware sector (witness CSR, Newport Networks and Clearspeed), so fund managers are keen to see Sarantel when it starts marketing its £15m fund-raising next month.

The Northamptonshire company makes antennae for mobile phone devices, and needs the money to step up production to supply its Taiwanese personal organiser manufacturing customers. Sarantel hopes it will be able to win customers among the mobile phone makers, too, especially as its products emit less radiation than the existing generation of antennae. Arbuthnot, which has been appointed as broker, is shooting for a stock market valuation, including the new money, of £40m.

Coming soon 2: The lavatories at the headquarters of TV Commerce were turned into a nightclub for an afternoon as the television production and broadcasting company filmed an advert for ring tones. It's an example of the tight hold being kept on the purse strings as it readies a flotation next month. The company is raising £2.5m with an offer for subscription, open to private investors willing to put up £3,000. The company has two TV channels: Your Destiny, which makes money from live tarot readings, and The Advert Channel, which allows viewers to vote for their favourites as if they were pop videos. With a £5m stock market valuation planned, the company looks good value compared with Optimistic Entertainment, which floated this month.

Stock-pickers' guide

Landing on Small Talk's desk was another of those helpful "Spotlight on AIM" publications from Growth Company Investor, the magazine owned by little Vitesse Media and the publisher of The AIM Guide. Stock-pickers will be drawn to the valuation tables, including one on the market's 20 lowest forward price-earnings ratios. This includes companies such as Aero Inventory, which supplies parts to aircraft maintenance companies, and Avanti Screenmedia, which installs video screens for advertising and entertainment in bars, hairdressers and shopping centres.

M&B to the rescue

There was chaos at the warehouse of a major supermarket chain just before Christmas. The potato packaging machine, which puts spuds into sealed plastic bags, went haywire because the bags themselves were suffering from static and not opening properly. To the rescue, Moore & Buckle, the subsidiary of London & Boston Investments, a mini-conglomerate listed on AIM. M&B is a specialist in short-run packaging work and had just moved into premises in St Helens. It worked 24 hours a day over Christmas to package the errant potatoes, an uptick in business that will be highlighted in a bullish trading update today.

Diesel firm splutters

The word on Charlotte Square is that Clean Diesel Technologies is tipping the hat around Edinburgh's financial community, as it looks to do a fund-raising. The Connecticut-based company has been developing catalysts that reduce engine emissions, but is yet to make the real breakthrough promised at flotation in 2001. It had $5.4m (£2.9m) in the bank at the end of September and is losing money at the rate of $1.2m a quarter.

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