Another biotech star falls to earth

Another shooting star in the biotechnology sector has fallen to earth with a nasty bump. Until yesterday morning Bicompatibles International was worth pounds 836m even though it has never made a profit and achieved a measly pounds 11m in sales last year.

Never mind. It had a wonder product that was going to revolutionise the treatment of coronary conditions - a special coating that prevents infection of arteries and blood vessels. Until yesterday morning, that is, when Johnson and Johnson, which controls 90 per cent of the US market for this treatment, decided it was no longer interested in Biocompatibles' wonder product.

By the end of the day the company was worth pounds 300m less - the shares having crashed 36 per cent - and the management were left to put a brave face on the loss of their only customer for their principal product.

Shocks of this nature are a not uncommon feature of the biotech sector. British Biotech suffered a sharp fall from grace in the early days when it ran into problems with a cancer drug. Celltech also suffered the stock market equivalent of sceptic shock when one of its great white hopes fell at the final hurdle of testing. Ditto Cantab.

And yet investors still seem willing to pile in, driving the shares of companies like Biocompatibles to unsustainable heights on the strength of a single, unproven product in an intensely competitive market where failure can be sudden and complete.

Unlike its shareholders, the Biocompatibles management remained unfazed yesterday by suggestions that it might have kept investors better informed. Far from being a setback, it said the collapse of the Johnson and Johnson deal freed the company to talk with a wider number of partners. That will be scant consolation to shareholders. But at least they can't say they were unaware that in biotechnology these things happen - particularly Johnson and Johnson, which happens to be the biggest single investor in Biocompatibles.