View from City Road: SmithKline forges a promising link-up

Hillary Clinton is nothing compared with human genes when it comes to introducing uncertainty into the longer-term prospects for individual drug stocks. Her putative reforms of America's healthcare system may take an axe to the prices of some of their existing medicines. But genetic research offers the tantalising possibility of products that could eclipse losses a hundredfold.

Try asking any of the world's 500 million smokers how much they would be prepared to pay for a test to discover if they were genetically pre- disposed to getting cancer from their habit. Small wonder this is an area all the big drug companies are pre- disposed to be in.

These are muddy enough waters for scientists, let alone investors, however. The word 'biotech' has long been an excuse for stratospheric share prices.

SmithKline Beecham's new strategic alliance with the US-based Human Genome Sciences, under which it will get worldwide rights to products developed by HGS from data on gene sequencing - the process of identifying the role played by genes in disease - could, however, be more significant than most.

HGS was created in 1992 by the Healthcare Investment Corporation, a venture capital fund. Two years ago the same fund provided Craig Venter, one of the key scientists in this area, with more than dollars 70m to set up the Institute for Genomic Research.

As part of the deal with HIC, he has agreed to allow Human Genome Sciences to commercialise the institute's health care applications.

Genetic research is moving on much faster than anyone expected, but finding a marketable product is likely to remain a lottery for some time to come. In linking up with HGS, however, SmithKline has increased its odds of a win.