Sinclair Pharma warns over Numis note

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The Independent Online

Numis, the broker and boutique investment bank, was last night defending the integrity of its equity research after being served with a legal letter from Sinclair Pharma, the drug development group it accuses of issuing a misleading prospectus for its flotation last year.

A research note last week alleged the company had admitted to errors in the prospectus. In private discussions, management had told Robin Gilbert, the veteran pharmaceuticals industry analyst at Numis, that the active ingredient in Sinclair's latest skincare drug was different to the one listed at the time of a fundraising in December and on the company's website.

Numis is refusing to retract its research, which it says was researched in a "proper and professional" way.

The company yesterday wrote to Numis to deny the suggestion that it has issued a misleading prospectus and to refute Mr Gilbert's suggestion that the document also omitted important issues in its discussion of Sinclair's intellectual property.

Sinclair was founded by Michael Flynn, the former clinical development officer at Cortecs, now Provalis, who agreed to resign when the company came close to collapse in 1998. It admitted several important drugs were not as far advanced through trials as previously indicated. Shares in Sinclair were down 2.5p to 151.5p yesterday, giving the company a market value of £82m.

The stand-off with Numis, whose chief executive is Oliver Hemsley, relates to Atopiclair, a cream for eczema. The product is expected to bring in revenues of at least £30m a year when it is launched, and the company is telling investors it expects to license the product to a marketing partner by the end of June.

Mr Gilbert wrote last week: "Atopiclair is based on a combination of proanthocyanidins, contained in grape seed extract, and telmesteine, in a cream formulation. The company accepts that the prospectus comment is incorrect on page 33, that Atopiclair is based on sodium hyaluronate."

Sinclair refused yesterday to divulge whether its lawyers have demanded Numis retracts its research note. Mr Gilbert is out of the country, but Numis sources insisted there would be no statement to retract his claim. One said: "This wasn't a rogue note written behind the company's back. There were two phone calls and an email. Robin is not some young buck trying to make a name for himself."

The bank is asking to meet Sinclair to iron out the scientific dispute that lies at the heart of the row. Other brokers said the confusion may stem from a "verbal error" made by Dr Flynn regarding the formulation of Atopiclair.

Elizabeth Klein of Baird Securities, Sinclair's broker, said that while the ingredients in Atopiclair are significant, the solidity or otherwise of Sinclair's intellectual property should be judged on the product as a whole. "The largest ingredient in the product is purified water, they've got a whole variety of things in there," she said.