Xenova sells rights to cancer drug as it fights to stave off fears of cash crisis

Xenova, one of the UK's oldest biotech companies, yesterday sold Asian marketing rights to its experimental brain cancer drug as fears grow that the company will run out of money.

Xenova, one of the UK's oldest biotech companies, yesterday sold Asian marketing rights to its experimental brain cancer drug as fears grow that the company will run out of money.

Pressure is growing on David Oxlade, the long-standing chief executive, as fears mount that the company in its present form might not be able to raise new money from investors.

The financial terms of the new deal were not disclosed but analysts said the upfront payment from a Taiwanese firm was likely to be small - an estimated £500,000. PharmaEngine agreed to license TransMID, a drug injected directly into brain tumours, for testing and marketing in China and South Korea.

Xenova's shares jumped more than 15 per cent to 4.75p from an all-time low, but are 30 per cent below their level last month when the company admitted it would be unable to fund work on potential new drugs beyond the end of this year.

The company has done some promising work on potential vaccines for smoking or cocaine addiction, but its chemotherapy supplement Tariquidar failed. After several high-profile mergers, Xenova is yet to get a drug on the market.

Investors are losing confidence in Mr Oxlade, according to one source familiar with Xenova. "The company has run out of steam with UK fund managers after previous fundraisings," the source said. "Either the shares are slowly reduced to a level where fund managers want to take a free punt on a late-stage drug project, or it has to merge."

Mr Oxlade's £220,000 annual salary has not been cut despite the company's shrinking share price and he defies corporate governance codes with a two-year notice period on his contract.

A shareholder said: "If [Mr Oxlade] had been successful, he should be rewarded for that, but being rewarded without success ought to be a non-starter."

Xenova said that it was working on strategic plans that would boost the company's fortunes.

Andy Smith, fund manager at Schroders Investment Management, said: "It is right that companies without a viable business go away to be replaced by new ones. It would be terrible if all biotech were allowed to hang on as long as Xenova."

Failed biotech companies

* PPL Therapeutics - The company that cloned Dolly the Sheep failed to create useful products from the technology and was sold off piecemeal.

* British Biotech - Held the promise of curing cancer, but it was over-hyping trial results and its shares collapsed.

* Bioglan Pharma - Built up a portfolio of skincare products but the company was sunk by its mountainous debts in 2002.

* Scotia - First quoted biotech to go bust, in 2001, after German partner stopped funding cancer trials.

* Cantab Pharmaceuticals - Put itself up for sale after a genital warts drug failed trials, and it merged with Xenova.