Shire deal lifts biotech sector

A $186m (pounds 114m) deal to buy a US drugs group unveiled by Shire Pharmaceuticals and good results from Oxford Molecular helped the biotechnology sector shrug off negative sentiment yesterday.

Shire saw its shares end 8p higher at 249.5p after revealing the purchase of Richwood Pharmaceutical of Kentucky, a competitor to Medeva in the market for drugs to control unruly children. Oxford Molecular's shares rose 3.5p to 248.5p after announcing losses cut by 27 per cent to pounds 677,000 along with a move to pay pounds 2m for an option to take control of Cambridge Combinatorial, the company run by Allan Marchington, younger brother of Oxford's chief executive, Tony Marchington.

But the sector was dragged lower early on by British Biotech, the UK's biggest biotech company, which was hit by press reports suggesting Marimastat, the company's potential anti-cancer blockbuster, faced problems both from current medical trials and the growing likelihood of competition from rivals such as Roche, the Swiss giant. The claims, denied by the company, sent the shares 10p lower at one stage yesterday, before bouncing back to end 5p higher at 157.5p.

The Shire deal was greeted more enthusiastically by analysts. Richwood claims to have launched the fastest growing drug in the US to treat disruptive children with so-called attention deficit hyperactivity disorder. In the space of 15 months, Adderall has swept up 5.1 per cent of a market put at $457m in 1996. The company claims that with its other treatment, DextroStat, it has taken its overall share to 9 per cent recently, mostly at the expense of Abbott Laboratories' Cylert product and Medeva's methylphenidate, the generic drug which has fuelled recent growth.

Richwood says the product is longer lasting and has fewer side-effects. However, none of its drugs has patent protection and the group is facing a class action suit relating to its Phentermine obesity treatment. The US Drug Enforcement Agency must also still approve Shire as a licence holder for strictly controlled drugs sold by Richwood.

Investment column, page 17