THE INVESTMENT COLUMN: York shareholders could pay dearly for setbacks

THE CITY never forgets, but it might forgive. Terry Sadler, the medicines entrepreneur whose last venture, Bioglan, went bust in 2002, is back with another company specialising in skin treatments. York Pharma floated at 25p with "friends and family" shareholders last April, having bought a fungal cream it hopes to get approved in Europe next year. By last month, fund managers were willing to back a pounds 2.5m fundraising at 80p, to push the product through regulators.

York could do with a little less hype if Mr Sadler is to triumph. Its broker reckoned the cream will end up selling pounds 150m a year for hard-to- treat infections. This guess might turn out true, but there is so much to prove that to use it to argue the share price should be 1,600p (which it did) is voodoo economics.

Yesterday, York paid pounds 5m with its inflated shares (up 10p to 110p) for Molecular SkinCare, a private company with treatments for psoriasis and to repair the skin barrier, damage to which might cause eczema. Both products are yet to prove themselves in the clinic.

York has pounds 5m in the kitty to fund these projects for a year or so, but shareholders will pay a heavy price for setbacks. Avoid.