SMALLER COMPANIES : Directors show confidence in young biotech venture

Alizyme, a budding biotech company, is at that interesting stage when early hope is turning into promise. It reached another turning point in its short existence last week when founding director and chief executive Andrew Porter took a back seat as a non-executive director.

Dr Richard Palmer, the chief operating officer, stepped up to take his place. The company also announced its preliminary results. Income, a paltry pounds 191,000, was overwhelmed by costs of pounds 1.1m to produce a deficit of pounds 1.02m after interest payments. More intriguing, however, were the heavy share purchases by directors that followed the announcement on Monday morn- ing. The full details - including Mr Porter's purchases - are detailed in the chart on the right.

What prompted the spending spree? One reason was that the directors had been unable to buy before the results. And Dr Palmer, who arrived in September, had also just been getting his feet under the table.

Even so, the purchases were unusual for the breadth of buying. There is clearly a view that the shares are undervalued right across the board - a belief emphasised by Dr Palmer: "At 32p, the shares only reflect the cash value of the business, so there is little or no perception in the market of any added value our work has created. I have a confidence and faith in the company that it's going to progress."

He says the company has already made substantial progress since July in creating value, while there is also a strong management team in place.

The question for investors, however, remains how to value a biotech company that may have many years to go before its dreams come to fruition. The question still exercises analysts. Some of the markets in which Alizyme operates have huge potential - any treatment for obesity, whether prevention or cure, would be a big money-spinner.

And it is cracking on with new trials, products and joint ventures. It has signed up a service agreement with Nichimen Corp, the Japanese trading house, and is testing several compounds for inhibiting lipase, the digestive enzyme for fats in the gut.

The shares have fallen from the 60p flotation price last June, and crept up a few pence last week to close at 37.5p. With a board this enthusiastic, the shares are worth a punt.