The Investment Column: New cancer drug is a mixed blessing for Oxford
Tuesday 11 March 2008
Our view: Cautious hold
Share price: 25.75p (-2.25p)
While it might not have exactly all its eggs in one basket, the biopharmaceutical group Oxford Biomedica is lauding one particular venture to support its credentials, developing the drug Trovax.
Trovax, a treatment that will hopefully combat all solid tumours, has just entered the third and final stage of its kidney cancer trial and is already fully subscribed with patients ready to try it. If it works, it will be doubtlessly be good news for cancer suffers, but for investors the picture is a little more blurred.
Some are more than a little dubious about whether the group is a solid investment choice, largely because of what they describe as an all-too-narrow second phase of Trovax's trial. According to analysts at Investec, most second phase trials would normally include a survival study – how many people actually benefit from the new treatment – but that this will only be considered in the third and final phase of the Trovax tests. Given that it will take until next year to generate any meaningful results, selling Oxford Biomedica stock is the way forward, they say.
The company's chief executive, Alan Kingsman, as well as other analysts, rubbish this suggestion arguing that few second-phase trials have a survival study and that it would have been prohibitively expensive at around £15m to include.
He argues that the drug has the potential to be a revolutionary cancer treatment and the speed with which the company has recruited patients for phase three shows that practising clinicians are enthusiastic about the drug's chances of success. Furthermore, he points to the fact that pharmaceutical giant Sanofi-Aventis has invested in the drug by entering into a licensing agreement with Oxford Biomedica, worth as much as €518m (£395m). Sceptical analysts point out that much of the money will only be paid on the successful completion of the trial.
The company does have other projects: ProSavin to treat Parkinson's and Hi8 to tackle skin cancer.
The results are encouraging say analysts with net losses narrowing to £15.3m from £17.7m last year. Cautious hold.
Our view: Buy
Share price: 320p (+10p)
"These results are to sit up and take notice of," say analysts at Lehman Brothers of Brixton's latest numbers published yesterday.
While most in the commercial property sector found 2007 heavy going, Brixton's figures posted yesterday beat expectations and led most analysts to recommend a buy, albeit a cautious one. Net asset value, which measures the value of asset against the value of liabilities, was at 545p, comfortably beating analysts' consensus of 524p.
The main feather in Brixton's 19 million square feet cap is the property it holds in west London, especially around Heathrow airport. In total, 77 per cent of its holdings are in London, were the downturn has been felt less than in other parts of the country – a view supported by Brixton's rental growth of 5 per cent in the past year, versus about 1 per cent across the rest of the sector.
According to Lehman Brothers, "the management has simply read the situation better than most of its competitors and positioned the business more effectively". This point is taken up by others; Citigroup believes that, "management has a track record of generating rental growth well above the average from its portfolio which, at a time when further yield compression is unlikely, should spur values".
All this does not mean the group is immune from the market. Further upset in the real estate market can only be bad for the group and the company's shares fell by 49 per cent in 2007, underperforming the sector by 17 per cent. On the other hand, so far this year shares are up 8.5 per cent. Buy.
Our view: Hold
Share price: €24.90 (+ 17 cents)
This is likely to be a challenging year for Irish Continental. The company posted what were described by Merrion Landsbanki analysts as, "excellent" results yesterday with profits rising to €50.1m from €32.2m in 2006, but this year is set to be tougher. By the group's own admission, the surge in the price of oil, up 71 per cent in the past year, is likely to have a detrimental effect on the business, which relies heavily on car passengers. The company has seen car volumes drop by 11 per cent this year.
Moreover, the group is likely to suffer from fewer tourists visiting Ireland from the UK due to economic woes. Yet another problem facing the group is the falling rate of sterling versus the euro, a bad thing says the company.
But investors can take heart from a few things. The company is about 70 per cent owned by just three shareholders – groups known as Aella, Moonduster and the property developer Liam Carroll – all of which have expressed an interest in buying the group. This might not lead to great upside, according to Merrion Landsbanki, but it has kept the share price pretty stable. Hold.
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