Bottom Line: Biotech risks
Friday 26 November 1993
But if everything goes according to plan - a big if - Lehman Brothers' pharmaceutical research team calculates there should be an average return of about 30 per cent a year.
Broadly speaking there are three ways of valuing these stocks - by comparative market capitalisation relative to number and status of development products, by comparative market capitalisation relative to research and development spending, and on a discounted revenue basis. On all three Celltech's price and pounds 176.5m market capitalisation look reasonable.
But before buying Celltech it is important to understand the risk. In its case Celltech Biologics, the subsidiary manufacturer of monoclonal antibodies - which is profitable, throws a floor under the share price at about 50p a share. But should the septic shock treatment in particular not bear fruit returns would fall sharply.
Serious buyers should hold the shares until the research has proved fruitful or otherwise.
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