City Talk: Skin craft at Smith & Nephew

IT'S FULL steam ahead at Smith & Nephew, the healthcare concern. On Thursday, the FDA - the US drugs agency responsible for approving new treatment - will meet to review the firm's new skin tissue supplement, Dermagraft.

Should Dermagraft win approval then the company's wonder product will have gained a significant boost. Dermagraft, developed from babies' foreskins, is used to treat diabetic foot ulcers and is already licensed for use in the UK, Finland and Italy. While profit growth is likely to be sluggish this year and next, thereafter there is every prospect of decent advances.

Much excitement in the market over rumours around BT that US giant Microsoft was poised with a bid. That sounds audacious, although no more so than whoever it was who dreamt it up - which is probably the truth. What cannot be denied is that the shares ended the week at 569p on some serious buying. The chances of a bid are remote, but such a rapid re-rating raises interesting questions. It may be a belated sigh of relief that BT is not going to tie the knot with MCI. There is a view that BT is being re-rated alongside regional US companies; or that, conversely, it is a safe haven, given the current storms in global markets.

And there is still the tantalising notion that if not Microsoft, then someone with a calculator has been doing their sums. It is not beyond the realms of possibility, given that BT's global strategy lies in tatters.

If BT is the old face of telecoms, Colt is the future. Set up in 1992, it now has some healthy sales. For 1997, analysts reckon the company will have more than doubled sales to pounds 80m or so, from pounds 35m in 1996. However, losses will continue, and investors will have to wait until after the millennium for it to break even. But the company is in a strong position to exploit the deregulating European markets. Colt is a local exchange carrier, and has built its own networks in London, Paris, Frankfurt and Hamburg. It has networks under construction in Berlin, Brussels and Zurich. Experience of similar US companies shows they can grab sizeable market shares from the opposition and Colt is already beating its prospectus forecasts, from its flotation in December 1996. The company is worth pounds 1.2bn, and Fidelity has the biggest stake, about pounds 650m. Over the next few years it is almost certainly going to be a seller, and the company has the attraction of being a bid prospect.

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