City Talk: Biotech sector loses the formula

The fall-out from the latest shock wave to hit the biotech sector continues. When Celltech declared on Wednesday that its German partner Bayer had dropped development of a septic shock treatment, its shares fell by a half. They have since recovered to 347.5p.

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.

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
Down-to-earth: Winstone isn't one for considering his 'legacy'
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower