Stock Market Week: High hopes for trial results, and even for profits, as bio-babes report

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A company which has suffered losses of nearly pounds 100m in the past five years and enjoys a stock market valuation of approaching pounds 1.5bn is the most intriguing entry in this week's profit stakes.

It could, of course, only be a runner in the fledgling, blue sky biotech industry where investment hope springs eternal.

British Biotech, the biggest and most advanced of the biotech babes, is hardly likely to break the habit of its brief lifetime this week.

Another deficit will be the result of its research burn as it pushes ahead with the development of its Marimastat cancer and Lexipafant pancreatitis treatments.

The size of the deficit will not be the main debating point; the progress report is regarded as much more important.

Although Marimastat is the flagship drug, Lexipafant is its most advanced offering.

Hopes are running high - they always are with blue sky groups - there will be some impressive news on the pancreatitis front.

At the end of July, the phase three trial, covering 290 patients, was completed. The patients were then checked for the next 28 days and examination of the subsequent data started in September.

Results should be declared with the figures on Wednesday. Should the positive display in the phase two trials be confirmed, BritBio could have a winner on its corporate hands and would submit an application for European Marketing Authorisation. If successful, BritBio could have the satisfaction of a drug on sale in a year or so.

The size of the pancreatitis market is the subject of some debate. Around pounds 300m seems the median figure.

BritBio is one drugs group not short of cash. In the summer it raised pounds 143m through a rights issue which underwhelmed its shareholders. They took up only 49 per cent, with the rest left with underwriters.

The shares have had a roller-coaster run over the past year. When excitement over the cancer drug was running high in the spring they soared to the equivalent of 326.5p. A year ago the price was 97.5p; last week it ended at 228.5p.

Another biotech enigma, ML Laboratories, reports year's results today. There are expectations its faithful followers will be rewarded with the sight of a profit - something which still eludes most biotech babes.

Last month stockbroker Panmure Gordon forecast profits of pounds 5m. It went on to suggest pounds 12m this year and for 2000 has set its sights on pounds 106m.

ML's climb from losses has had a negative impact on its shares. They have been in steady decline since the summer, falling from 468.5p to 269.5p on Friday. Even so, the company has a stock market value of around pounds 380m.

It is largely the creation of Kevin Leech, who made his fortune building up his family's funeral business and selling it to the Co-operative Society. He still has 54 per cent of ML, probably the first of the current generation of bio-babes to come to market - it arrived in the middle of the 1987 Crash.

The group developed a successful treatment for kidney dialysis patients and a dry powder asthma inhaler. It is now focusing on Aids and cancer drugs.

After an uninspiring week shares were engulfed by a surge of pre-Budget rapture on Friday. Even so, the gap between London and New York has yawned wider in recent weeks as the Dow Jones Average has turned on a rampant display, hitting eight consecutive peaks.

This week London will, of course, be dominated by the response to the last Budget of the present Parliament. There are, in some quarters, suggestions any give-away will be poor for sentiment and that a restrained exercise will remove some of the uncertainty which has bedevilled shares in recent weeks.

Each year activity in the Budget run-up is subdued. This year its inhibiting influence has lasted longer and probably been more pronounced. Soar-away sterling and fears of higher interest rates have contributed to the malaise.

Yet political worries have not been such a telling influence as many expected. It is difficult to decide whether the market has already factored in a Labour Party victory at next year's election.

Certainly there is a widespread expectation that shares will once again enjoy their Christmas spree, irrespective of the political climate. However, the festive season is usually highly technical with price movements often exaggerated by the low trading volumes.

Even after Friday's exuberance the Footsie blue chips index is still 54.4 points below its peak, hit last month. This year Footsie has lagged miserably behind the Dow Jones Average, underlining the decoupling between London and New York.

Second and third-line shares have often experienced subdued conditions since performing well in the first four months of the year. There have been complaints that trading in shares of medium and small companies has become increasingly difficult in the past few weeks.

One tiddler that has had a volatile time since it arrived four years ago is Tadpole Technology, the computer group. Its shares were placed at 65p. Two years ago they hit 432p and after plunging the depth to 30p are now 36p. Like a biotech company it is prone to losses.

Its figures are expected on Friday, an appointment with the market the company has yet to confirm. Last year it lost pounds 9.9m, compared with hopes of profits of pounds 10m, and could well experience a pounds 3.5m setback this time.

Utilities, once again, are among the big battalions reporting. National Grid and Severn Trent have chosen tomorrow, Budget Day, to produce figures.

Sharing a day with the Chancellor is often a sign that disastrous results are due. It is felt little attention will be paid to them because of the saturation Budget coverage. Such considerations are unlikely to have influenced the two utilities - National Grid should produce pounds 304m (pounds 278.9m) and Severn Trent pounds 210m (pounds 189m).