The Investment Column: Cancer trials boost Biotech

British Biotech's assurance yesterday that clinical trials of marimastat, its potential blockbuster cancer drug, are on track was enough to satisfy a market shell-shocked by recent calamities in the biotech sector.

The group's share price, which has dipped from a high of 270p this year, added 3.5p to close at 168p on encouraging first-quarter results.

As Biocompatibles and Celltech have clearly shown, management's confidence about a product is no guarantee of success.

However, with the first results from marimastat phase III trials not due until the first half of 1999 and filing of Zacutex, the pancreatitis treatment, in Europe not due until next year, investors have little else to guide them.

It is encouraging that British Biotech is expanding its cancer trials so extensively. Two new breast cancer trials of almost 700 patients have started this year, both largely funded by external bodies, adding to continuing trials in six cancer types.

Crucially, the group is also starting studies combining marimastat with existing chemotherapy drugs.

This blitz of cancer trials and drug combinations makes sense. To capitalise on the huge cancer market worldwide, marimastat needs to be the drug of first choice for most cancers. Moreover, if the theory behind marimastat is correct, combination therapy should prove to be the best treatment, with chemotherapy shrinking the tumour and marimastat in effect sealing it, preventing the spread of secondary tumours. While the City waits for proof, British Biotech's pounds 173m cash pile should see it through to commercialisation.

Meanwhile, the group is keeping costs in check. First-quarter losses were pounds 1m higher at pounds 9m but on target. Valuation remains the great unknown. Lehman Brothers reckons the shares are fair value at 155p, assuming marimastat, half the value, has a 55 per cent probability of reaching market. Hold for now.