Jeremy Warner's Outlook: Biotech darling's poison pill leaves sour taste

Crossrail pleading; EasyJet complaint; Immortal Greenspan
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The Independent Online

Celltech's chairman Peter Fellner seems to have secured a reasonable price for the founding company of Britain's biotech industry with yesterday's £1.53bn cash bid from UCB of Belgium, but just in case anyone else was thinking of having a pop, he's put a giant great poison pill at the heart of the deal. By coincidentally licensing his most promising drug, known at present only by its code name of CDP870, to UCB, regardless of whether the deal goes through, Dr Fellner has made Celltech virtually worthless to anyone else. As done deals go, they don't come any more ready-cooked than this one.

Celltech's chairman Peter Fellner seems to have secured a reasonable price for the founding company of Britain's biotech industry with yesterday's £1.53bn cash bid from UCB of Belgium, but just in case anyone else was thinking of having a pop, he's put a giant great poison pill at the heart of the deal. By coincidentally licensing his most promising drug, known at present only by its code name of CDP870, to UCB, regardless of whether the deal goes through, Dr Fellner has made Celltech virtually worthless to anyone else. As done deals go, they don't come any more ready-cooked than this one.

Oddly, Celltech is unable to advance any convincing excuse for using such a high-dosage device. Could it have been that UCB would not have been prepared to make the bid without the exclusivity the licensing deal gives? Apparently not. The licensing deal and the takeover were being discussed separately but in tandem, Celltech insists, so it made sense for both to be signed at the same time. Honestly, it was no more sinister than that. Well, there's a thing.

To be fair, Dr Fellner has been trying to find a partner for CDP870, a treatment for rheumatoid arthritis, for some considerable time so as to help defray the costs of putting the product through its final Phase III trials. That he couldn't do better than UCB gives some cause for concern. There's nothing wrong with UCB, but it is hardly Big Pharma and it may lack the development and marketing clout to help the product achieve its full potential. Others plainly didn't think CDP870 the likely blockbuster UCB does, otherwise they would already have signed up.

Still, UCB's bid is in cash and at a decent premium to the market price. Celltech shares are miles below their bubble-inspired high, but unlike the rest of Britain's biotech industry, which seems throughout its existence only to have eaten capital, Celltech has succeeded in creating at least some value. Since it was floated back in the early 1990s, Celltech has tapped the markets for only £27m of equity capital, and from the moment it was born out ofthe old state-funded National Enterprise Board, the company has been largely self-financing. There are not many biotechs you can say that about.

Crossrail pleading

There is nothing new about business leaders writing to the Government volunteering to part-fund Crossrail, the projected rail link connecting Heathrow airport to the west of London with Stratford in the east. Almost exactly the same letter was written a year ago. It didn't do much good then, so it is questionable that it will make any difference this time either, even with the weighty name of Lord Marshall of Knightsbridge, chairman of British Airways, splashed across the letterhead.

No one doubts the sense of theproject. It's already too late for it to make a difference to London's bid to stage the 2012 Olympics. Even if the project were given the go-ahead tomorrow, it wouldn't be completed until 2013 at the earliest. Yet if London is to keep growing as it has, there is a desperate need for Crossrail regardless of any success or otherwise in attracting the Olympics. London's transport system is already stretched to breaking point. Congestion will have reached crisis proportions by 2020 if nothing is done in the meantime to ease the problem. Crossrail is easily the most eloquent and cost-effective solution.

The Government is supportive in principle, having coughed up £154m of seedcorn finance, but in practice it still balks at the likely £10bn plus cost. Business leaders promise to stump up £2bn, which could be raised by hypothecating an element of business rates towards the cost of the link. A further £3bn could be raised by securitising future fares revenue, leaving the Government to pick up the rest of the tab.

Ominously, no amount at all has been set aside for Crossrail in the Government's forward-spending commitments, and the project got no mention in the Strategic Rail Authority's assessment of future spending plans. None the less, the Treasury might be prepared to contribute, say £2bn. Unfortunately, that's still a long way short of what's needed to get Crossrail off the ground.

Everyone involved has become frustrated at the indecision. Would the private sector be prepared to contribute more? Perhaps a little, but not without give on the Government's side to match. Nor could private business be expected to enter into an open ended commitment to fund any cost overruns, which would seem inevitable for a project of this size and complexity. Only the Government can do that. Yet with so many other calls on its pocket, is this relatively low priority transport project something the Government ought to be backing?

Crossrail's many supporters insist the Government would get its money back many times over in extra tax revenues. Indeed, the risks of not funding such an expansion of the transport infrastructure would seem to be much higher than the risks of going ahead. The Jubilee line extension looked a monumental waste of money at the time it was being built, yet it seems doubtful that Canary Wharf would have become the investment banking Mecca it now is without it. The costs have paled into insignificance set against the economic benefit to London and the contribution that Canary Wharf occupants make to the Treasury's coffers. Time for the Government to stop prevaricating and make a decision.

EasyJet complaint

I've yet to encounter a merger that can be described as "pro-competitive and pro-consumer" yet, apparently oblivious to the lessons of history; that's the view the European Commission takes of Air France's merger with the Dutch flag-carrier KLM. Ray Webster, chief executive of easyJet, has determined to challenge the absurdity of this stance in the European courts, which unless as biased in favour of national governments and their flag-carriers as the European Commission, must surely back him.

The merger was a God-given opportunity for the European authorities to do something about the stranglehold Air France and KLM have on their hub airports in Paris and Amsterdam, yet the Commission waved the deal through with only minor conditions. In the process it has succeeded in creating a monstrous union of monopolists, with their flag-carrier perks left largely intact. EasyJet has long demanded better access to Paris but been denied it. The Commission's failure to impose worthwhile conditions demonstrates a continued inability to ride above the diktats of supposed national interest. EasyJet deserves satisfaction. Its chances of getting it are depressingly remote.

Immortal Greenspan

Nobody doubts the wisdom, genius and continued vitality of Alan Greenspan, chairman of the Federal Reserve, yet at 78, isn't it about time he moved over and let someone else have a go? The cynical view of President George Bush's decision to give him another four-year term is that Mr Greenspan is being rewarded for running one of the most accommodative monetary policies in modern American history. Mr Greenspan has ensured that US interest rates have been kept low and credit easy for much longer than most would have thought prudent. In the process he has arguably boosted Mr Bush's chances of re-election.

Yet the real reason is that Mr Bush cannot afford to take the risk of trying anyone new. He's got problems enough as it is. The fast-growing economy is a ray of sunshine in a cloud-filled sky. This is not the time to tell one of the architects of that success to go take a hike. As he approaches November's presidential election, Mr Bush wants to send out a message of continuity and calm. Few are better capable of conveying it than Mr Greenspan. Mr Bush has again put off the day when markets must contemplate the possibility of life after Mr Greenspan. The longer he carries on, the harder it is to imagine and the greater the turbulence when eventually he goes to join the great central banker in the sky.

jeremy.warner@independent.co.uk

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