Chiroscience rights issue calms frenzy

Biotechnology company Chiroscience completed a remarkable 48 hours on the stock market yesterday, with its shares more than doubling at one stage before beating a partial retreat on the announcement that the company was planning a pounds 40m rights issue at an unspecified future date.

In heavy trading, the shares surged from 400p to 588p at one stage, before falling back to close at 460p. More than 4 million shares changed hands, 12 times the daily average. The volatile performance followed a 117.5p rise on Thursday.

The excitement was caused, analysts said, by the announced scrapping of an alliance with Pharmacia & Upjohn to develop a purified epidural manufactured by Swedish drugs group Astra.

The drug, Levobupivacaine, is Chiroscience's leading treatment in development. Like other drugs the company is developing it is a "chiral", or single isomer version of an existing drug. Chiroscience believes these purer drugs function better than existing treatments.

Going it alone could boost revenues by a sizeable amount, but it also increases the risks taken by the company. When biotechnology companies sell drugs on to big pharmaceuticals they normally receive royalties of between 10 and 15 per cent. On their own they keep all the revenues but have to pay for development and marketing costs.

Both Chiroscience and its rival British Biotech are developing so-called matrix metalloproteinase inhibitors, a class of compound that analysts say has shown great promise in cancer and arthritis treatments.