Shares in fledgling biotechnology companies had a roller-coaster ride yesterday after the announcement that Celltech, a leading player, had abandoned a key anti-asthma drug.
Celltech's shares plunged 163p to 518p after the group revealed that a joint study with the US drugs group Merck of its CDP 840 compound, originally billed as an important advance on current inhaled anti-asthma drugs such as Glaxo's Ventolin and Becotide, had failed to meet expectations.
The announcement comes just over seven weeks after four Celltech directors netted pounds 3.5m from cashing in share options. But Dr Peter Fellner, who made around pounds 2m from the option sales, yesterday defended the actions of the four men. "We went out of our way to undertake the option exercises in a completely above-board way, while retaining large stakes."
Dr Fellner said that after preliminary results were released on 6 December, they knew no further public statements were due to be made for a couple of months, when the clinical results on the CDP 840 trials would be announced.
The brokers Cazenove and the company's other advisers said it would be appropriate to move at that time, given the limited exercise period. A two-year "lock-in" period on directors' holdings ended on 9 December and the closed period began again in early January.
The announcement is the first seriously bad news to hit the sector since British Biotech unveiled "promising results" for its Marimastat anti-cancer drug at the end of November and sent shares soaring. Dealers marked the sector down sharply yesterday, before prices staged a recovery.
Of the bigger stocks, Celltech touched 488p at one stage, before bouncing back, British Biotech slid to pounds 18.53 but ended 10p off at pounds 21.13 and Scotia came back from 563p to 603p, just 7p down on the day.
Few analysts saw this latest setback, which coincided with news that British Biotech had successfully raised pounds 47.5m from the exercise of warrants, as marking the end of the boom in the shares.
One said: "This is definitely not the death of the sector ... but all this should drive home to the stock market the inherent risks in drug development."
It seems certain to hit confidence surrounding Celltech.Reuse content