Shot in the arm for Chiroscience

The Investment Column
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The Independent Online
Chiroscience saw its shares leap in April on hopes that the biotechnology group's anti-cancer treatment would be more effective than British Biotech's Marimastat, the drug that set the sector alight last November. That fuelled a rise in the shares to a peak of 485p and the group promptly rolled out a pounds 40.3m cash call at 410p. Up to now they have failed to breach that barrier, so yesterday's 15p rise to 411p is more than usually significant.

Investors are regaining their confidence as they switch their focus to Levobupivacaine, a local anaesthetic which could be on sale in 1998 if all goes well. Yesterday's interim results, which saw losses increased from pounds 5.52m to pounds 7.32m in the six months to August, brought encouraging news on Levobupivacaine.

The company claims it has received good initial support from the US Food and Drug Administration, which it hopes will approve the drug by the middle of 1998.

Chiroscience is optimistic that Levobupivacaine can win at least a third of a $900m market, so much so that it parted company with Pharmacia & Upjohn, its development partner, earlier this year. But it still needs a marketing tie and expectations are high that current talks will deliver a link with a big drugs group soon.

With pounds 47m in the bank, Chiroscience should not need to raise more funds until it becomes self-financing through sales of Levobupivacaine. Even so, it still needs development partners to finance the pounds 300m-odd costs of developing its MMP drugs and its potential oral treatment for asthma, due to go into patient trials next year.

Even capitalised at pounds 347m, Chiroscience will look grossly undervalued if all these deals come off. But the risks remain and next spring's announcement of the results of the Levobupivacaine trials will be crucial to its credibility. Still speculative and recently buoyed by vague bid prospects.