Phytopharm boost from dog-rash drug

Shares in Phytopharm jumped yesterday after the biotech firm struck a deal to license its skin treatment for dogs to Schering-Plough's animal health unit. The stock closed up 9.1 per cent at 54p.

Phytopharm makes Phytopica, a natural product based on three plants designed to treat skin rashes in dogs, while Schering-Plough will be responsible for marketing and selling it to vets. It is a new treatment for canine dermatitis, designed to plug the gap between heavier treatments such as steroids and milder, less effective options such as shampoos.

Sally Bennett, at ING, said Phytopica could achieve annual sales of up to $40m (£23m). "This is the best sort of deal we could have expected. My belief is that the terms ... are very favourable," she said. Under the terms of the deal the two companies are believed to share profits almost equally.

Of Britain's six million dogs, a million get eczema every year. Assuming that 10 per cent of owners will seek treatment and that the average treatment will cost £100 the UK market is likely to be worth up to about £20m a year. The two companies plan to target Britain first then spread into Europe and the US over the next few years.

The news gave a boost to Phytopharm, which suffered a setback in November when its Alzheimer's drug failed to show benefits in tests. It said it would stop work on Cogane, derived from a Chinese herbal remedy, until it found a partner to fund bigger and longer trials. A study involving 256 patients showed that Cogane was no better than a dummy pill in halting the advance of Alzheimer's disease.

Richard Dixey, the chief executive, was setting up meetings with potential partners yesterday. He said: "I'm well satisfied with the progress."