Investors fall for attractions of the biotech babes

MARKET REPORT
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The Independent Online
The so-called biotech babes stimulated the stock market. As what had appeared to be another record-breaking run petered out it was left to the second-line drug shares to underline just how fashionable they have become among trendy investors.

British Biotech, which has completed successful phase- two trials on its pancreatitis drug, bounded 59p to 753p, a two-day gain of 128p.

Scotia Holdings, a mere 273p earlier this year, rose 49p to 695p, spurred by an ABN Amro Hoare Govett suggestion the shares were a buy up to 1,000p. Interim figures are expected on Tuesday.

And Oxford Molecular jumped 35p to 183p after revealing a DNA joint venture with Perkin-Elmer, the US group.

Chiroscience, also thought to be forging overseas links, and Celltech, edged ahead and Cortecs International held at 85p, a high.

The blue-sky hope factor looms large among the bio babes. Profits have yet to become a serious consideration; most, indeed, are heavily loss- making, spending spectacular sums on drug research.

Many observers are prepared to argue they are still ridiculously cheap in relation to their pipeline of potential drugs. And they are obvious takeover candidates as the drug giants seek to keep up the momentum of their own drug developments.

Their high-flying performance was not matched by their drug peers who tended to give ground. But Fisons, on hopes of a higher bid, rose 5p to 261.5p and SmithKline Beecham added 7.5p to 625.5p.

The FT-SE 100 index was at one time up 21.6 points at a 3,587 trading peak, with the market talking confidently that the 3,600 level would be topped. With the Dow Jones Average surging above 4,800 points, more takeover sparks flying among the electricities and the futures expiry creating only the merest ripple, there seemed more than enough fuel for a spectacular record-breaking performance.

But it was not to be. Once it became apparent New York would not, at least for the time being, retain its exuberance, profit-takers moved in and soon shares were struggling vainly to stay in positive territory.

At the close the FT-SE 100 index was down 0.8 at 3,564.6.

Trading was busy with turnover topping a billion shares for the first time this year. BSkyB, moving into Footsie on Monday, was the busiest traded share with Seaq printing volume at nearly 232 million.

The Pearson sale of 8.5 per cent of BSkyB generated the action. The shares were sold by Barclays de Zoete Wedd and Goldman Sachs at 358p with Footsie- related funds and US institutions keen to buy.

The interest in the offer will no doubt lead to the sale of Pearson's remaining 1.25 per cent stake. BSkyB gained 6.5p to 370p, but Pearson was little changed at 623p.

Granada, a BSkyB shareholder, gained 6p to 654p following an investment presentation.

PowerGen's interest in Midland Electricity sent the generator's hitherto high-flying shares tumbling 25.5p to 578.5p. National Power dimmed 8p to 542p in sympathy. Midland's response was a 45p surge to 938p and other takeover favourites, such as Yorkshire, up 14p to 868p, were encouraged higher.

British Aerospace continued to bask in the glow of its figures, gaining 21.5p to 699p. It has climbed 49p since the interim figures were announced on Thursday. NatWest Securities speculated that, should the oft-mooted GEC bid appear, it would be in the region of 900p a share.

A combination of better-than-expected figures and takeover hopes kept insurances on the boil with Legal & General 7p higher at 572p. Lloyds Abbey Life rose 14p to 447p on the perennial suspicion Lloyds Bank will sell its controlling stake or bid for full ownership. But Royal Insurance, regarded as the most takeover-prone in the sector, fell 4p to 365p.

Eurotunnel remained in an investment hole, off 23p to a 119p low. P&O floundered another 3p to 503p.

Meyer International, the timber group, produced the inevitable Friday profit warning, tumbling 22p to 301p.

Vodafone firmed to 279.5p as US ADR shareholdings went to 36.29 per cent. All told, more than 40 per cent of Voders' capital is now US-held.

A presentation for the Direct Line insurance business failed to help shares of the Royal Bank of Scotland parent, down 3.5p to 465.5p. National Westminster Bank shaded 5p to 622.5p as the clamour faded that it was about to sell its US operation.

TAKING STOCK

o Union, the finance house that many in the stock market believe is ripe for a take-over bid, has been actively traded this week.

A small deal was struck at 120p yesterday as the price moved 5p higher to 118p. Joseph Lewis, a Bahamas-based investor who used to run a London leisure business and has built a stake in Christies International, the fine-art auctioneer, is rumoured to have been buying. Cater Allen remains the favourite to pounce.

o United Auctions (Scotland) moved from the 4.2 market to AIM yesterday - and promptly collected a tender bid for a near-30 per cent stake from Guinness Peat, the finance house run by New Zealander Sir Ron Brierley. The offer is 275p cash a share against the 215p, up 5p, closing price.

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