Cantab shares dive 67% on drug failure

The UK biotechnology sector suffered its second major setback in a month yesterday as shares in Cantab Pharmaceuticals plunged 67 per cent following the surprise termination of its research collaboration with SmithKline Beecham into genital warts.

The UK biotechnology sector suffered its second major setback in a month yesterday as shares in Cantab Pharmaceuticals plunged 67 per cent following the surprise termination of its research collaboration with SmithKline Beecham into genital warts.

Cantab shares fell 156p to 76.5p, valuing the company at just £34m, after it said its TH-GW compound was no better than a placebo in preventing the recurrence of genital warts. TH-GW was due for launch in 2003 and forecast to generate sales of $400m (£267m). The setback comes three weeks after shares in Scotia Holdings fell 60 per cent following its failure to win regulatory approval for its lead cancer drug.

SB, which funded the warts research and owns 2.65 per cent of the group, is terminating its relationship with Cantab, thereby removing yet another of the selling points on which Cantab based its flotation in 1993. Last month, US regulators forced Glaxo Wellcome to terminate a research partnership with Cantab as a consequence of its proposed merger with SB.

Cantab, which abandoned takeover talks with rival Peptide Therapeutics in the summer, is now vulnerable to a bid. Baxter International, the US drugs giant, Corixa and Avant, the US biotech firms, and even Peptide, in which Baxter has a stake, were yesterday tipped as possible bidders, with Powderject Pharmaceuticals, the UK vaccines group. Powderject recently outbid Cantab for Medeva's vaccine manufacturing facility.

One analyst said: "The share price drop reflects the intangible loss of the SB partnership. But there's also a great deal of frustration that Cantab's management has squandered so many opportunities lately."

Cantab accused the City of over-reacting. "This is a setback, not a disaster," said a spokesman. "It's just one of seven projects." Cantab, he said, was "always talking" to other biotechs about product collaborations and possible mergers.

Cantab is not now expected to be profitable until 2004, two years after it is forecast to run out of cash.