View from City Road: British Bio-tech taken on trust

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ALONGSIDE the GPA debacle, the flop of the Telegraph issue and the disappointing price achieved by Anglian Windows, the flotation of British Bio-technology looks an unqualified success. The price of 425p which Kleinwort Benson achieved for the pounds 30m share placing was exactly in the middle of the range suggested by last month's pathfinder prospectus, and the shares quickly moved to a 25p premium when dealings began yesterday afternoon.

Only in the US did the company's plans go awry. Morgan Stanley found purchasers for fewer than a quarter of the pounds 8m shares pencilled in for US investors, affected by recent weakness of their own bio-tech sector.

British Bio-technology and its ilk are scarcely typical companies, of course. British Bio-tech comes to the market with large and growing losses, no prospect of positive cash flow for several years and a warning that it will need substantial additional financing in the future. Its value has nothing to do with the last month's stock market falls and everything to do with its chances of discovering viable treatments for Aids, cancer or asthma.

Assessing the prospects of its research lies beyond the competence of mere investment analysts. Since real breakthroughs may depend on inspiration and luck, it is not even clear that scientists are well-placed to give a meaningful view on British Bio- tech's chances. In comparison, even Eurotunnel looks a straightforward investment.

To a large extent an investment in a biotechnology company is an act of blind faith. British Bio-tech's shares are therefore only for the trusting.