Biotechnology sector dives sharply

Biotechnology shares dived yesterday amid increasing fears that British Biotech's mammoth pounds 143m rights issue would be left with the underwriters. The company's own shares dipped as low at pounds 19 at one stage, some 150p below the rights price, but recovered to end 10p down on the day at pounds 20.30.

However, they were one of the few resilient features in the sector. The bigger companies suffered with the rest. Scotia, one of the biggest behind British Biotech, plunged 44p to 671p. Celltech were down 36p at 509p and Chiroscience dropped 18p to 319p.

The British Biotech issue is underwritten by merchant bankers Kleinwort Benson and fully sub-underwritten, mostly by existing shareholders in the group. A spokesman for British Biotech said yesterday: "The money is obviously guaranteed to us, so we are relatively happy. Obviously we are a bit disappointed that the share price has not held up."

The company announced that directors would be investing pounds 100,000 in taking up rights, although three executive directors have sold part of their nil-paid rights to take up the remainder of their allotments. Chief executive Keith McCullagh, finance director James Noble and John Gordon, another executive, have sold rights at 10p as a prelude to taking up new shares.

However, analysts remained doubtful last night that the group would be able to complete the cash call successfully. Robin Gilbert at Panmure Gordon said: "The British Biotech issue is struggling and is causing a reassessment of people's commitment to the sector." It would be surprising if it gets away, he said. "I am sure there will be a lot of unwilling holders."

Another analyst said sentiment towards the sector would depend on how the Biotech issue went. He said: "We may not have seen the end of this markdown. I would call it more of a markdown than a selling frenzy."

Other recent or coming biotech issues were putting a brave face on the affair yesterday. Cambrio, one hopeful, confirmed its intent to float at the end of the month.