Traditionally, the point of biotech companies was to discover new compounds whose development costs would be shared with a larger partner. But Peptide's research programme was seeing it burn more than pounds 1m a month and its poorly- rated shares prohibited it acquiring other drug development companies with products on the market already generating cashflow. Should investors feel disappointed to see Peptide's drug discovery arm part-given away to venture capitalists?
That depends. Stripping out the pounds 25m Peptide has in the bank, the market values Peptide's technology in both vaccines and drug discovery at a measly pounds 10m.
Peptide will retain a stake, as yet undisclosed, in the drug discovery business, without any obligation to fund it, in return for handing over the assets. So investors who believe the drug-discovery portfolio is valuable should buy the shares now. More sceptical investors can take comfort that the deal will mean Peptide's cash will last until its first product, ArilVax, a yellow-fever vaccine, hits the US market.
There are better reasons to buy into Peptide. Other rock-bottom biotech stocks, such as British Biotech, have recently enjoyed increases in their shares on the back of news of partnership deals and late-stage clinical trials news.
ArilVax phase III trial data is due by the end of the year; three other vaccines are in phase II trials at present; and a partner could soon be announced for Peptide's OraVax oral vaccine project. Betting on good newsflow is risky, but courageous investors should find Peptide attractive.