Chiroscience considers pounds 100m float of chemistry division

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CHIROSCIENCE Group is looking to sell its ChiroTech chemistry division in a move analysts said could generate at least pounds 80m, a person familiar with the proposed sale said at the weekend.

Chiroscience, one of Britain's burgeoning group of biotechnology companies, has already received strong interest from several potential buyers after putting ChiroTech on the market in recent weeks, the person said. This profitable offshoot made up about 64 per cent of Chiroscience's revenue in the first half of 1997.

The sale would be the second major sell-off in the growing UK biotechnology sector. Celltech last year sold its "biologics'' contract drugmaking unit to Alusuisse-Lonza Holdings AG for pounds 42m, a price that may rise to over pounds 50m, depending on future profits.

"I think it would be a very good move,'' said Nick Woolf, analyst with BA Robertson Stephens & Co. "ChiroTech operates independently and is profitable, and is a very different business from what they are trying to achieve [in drug development].''

For Celltech, the biologics sale allowed it to stave off asking investors for more funding. It also allowed it to concentrate on its potentially more lucrative drug development business.

Chiroscience hopes to do the same. The Cambridge-based company, which was founded by UK biotech entrepreneur Chris Evans, will use the proceeds to offset its "cash burn,'' or spending rate, of about pounds 2m a month, lessening its need for additional fund-raising. Chiroscience raised pounds 40m from a rights issue in 1996.

Rebecca Iveson, a Chiroscience spokeswoman, would only confirm that the company was "looking at ways of realising shareholder value'' from ChiroTech.

She said "discussions are ongoing'' and that options might include "selling it or floating it'' but declined to discuss progress.

Bill Blair, analyst with Robert Fleming, said ChiroTech could be worth as much as pounds 100m, if rated in the same way as Oxford Asymmetry, which floated this month. That company now has a market value of pounds 188m.

"This must be a very good time to sell,'' said Mr Blair. "Chiroscience needs to raise money in the next two years and anything they can do to avoid a rights issue is good news.''

ChiroTech focuses on compiling "libraries'' of molecules that can be used to discover new drugs for major drug companies. It also makes refined "chiral'' base chemicals that other drugmakers may use for clinical trial programmes to test their new drugs.

Its lead product, lactam, is the base material for Glaxo Wellcome's 1592, which is expected to be a major Aids drug in coming years.

It also makes S-Naproxen, a pain killer which it sells to other drug companies.

At a time when drugmakers are looking to save costs by outsourcing' - or contracting out - their research and development, analysts said the ChiroTech unit could be very valuable to the right buyer.