But it is proof of how volatile the sector can be. Celltech's drama prompted a general sell-off in biotech, and few escaped the uncertainty. Only weeks ago stockbroker Henry Cooke, Lumsden was adamant the shares were a buy. It is a reminder not to take analysts' views on the sector at face value.
What should investors do? The best bet, if you must be in the sector, is to have a balanced portfolio. Buy four or five shares, and try to reserve some money for at least one lower-risk venture which has a product close to, or already on the market, rather than in development. That way, you can hope that your one success will more than compensate for the failures there inevitably will be in the future.
Lonrho has announced that talks have begun to merge with JCI, the South African mining conglomerate. One outcome could be the departure of chief executive Nick Morrell, only appointed to the post in October last yea after Dieter Bock's decision to step down. Observers expect Mr Morrell is set to depart the group at some stage, regardless of whether the merger succeeds or not. If it doesn't JCI would revert to its demerger option; either way there would be little left to do for Mr Morrell.
Francis Mackay, chief executive of Compass Group, has sold nearly pounds 2.5m of shares, cutting his stake in the UK's largest caterer. The sale comes after five years in which Compass shares have soared from 185p to 664p. The shares are slightly down on the 742p high hit in early March. Earlier this year French hotel group Accor cut its shareholding by over half, though it still owns 10 per cent of Compass.
Mr Mackay, who has worked at Compass for 11 years, exercised options over 381,777 shares exerciseable at between 157p and 185p and sold the shares on 16 May at 654p for a profit of nearly pounds 1.9m. The sale took place a day after Compass announced an 18 per cent rise in profits to pounds 56.4m in the half to March 30.
"After eight years of holding options he finally wanted to exercise some, but he is still totally committed to the business," said a spokesman.
Mr Mackay holds a further 666,267 options which he could exercise now which are showing a potential profit of pounds 2.66m, and 200,000 options which he cannot exercise until 1998 and 1999. He also holds nearly 645,000 Compass shares directly.
Greg Feehely of Dresdner Kleinwort Benson expects pre-tax profits of pounds 135.5m in Compass's current year, but cuts his forecast for the year to September 1998 from pounds 165m to pounds 153m because of the strong pound.
On the buy side, William Syson, a non-executive director, was busy in the market, snapping up 20,000 shares in investment trust Scottish Value Trust, the vehicle of fund manager Colin McLean. Mr Syson lifted his stake to 38,362 shares - the first substantial rise since 1993.
Scottish Value last featured in March when it won control of small companies manager, Pilot Investment Trust, in a pounds 47.9m bid. SVM should inject some sparkle into Pilot's performance, where the net asset value had risen by only 17 per cent over four years. Mr Syson's move suggests high confidence in such an outcome.
Finally, does a raft of profits warnings among smaller companies signal any wider trend? Sketchley, the dry cleaners, said accounting problems had created a small loss for the year. On AIM, London & Edinburgh Publishing revealed that profits for 1996 were pounds 220,000, against the pounds 400,000 forecast in the prospectus. Stonemasons Drings of Bath said profits would probably be close to pounds 110,000, rather than the pounds 260,000 forecast. Coutts Consulting also warned of lower profits. Bluebird Toys has problems in the United States.
Such disparate problems and sectors would deny any common thread, but it serves as a warning that for new issues on AIM and Ofex, read the prospectus carefully and consider lopping at least 30 per cent off any forecast.Reuse content