Biocompatibles shares dive as US deal falters

Shares in Biocompatibles yesterday went into free-fall, plunging by 36 per cent after the medical coatings company failed to agree a comprehensive licensing deal with US healthcare giant Johnson & Johnson.

The market had expected the company to announce a wide ranging licence agreement with J&J whereby Biocompatibles' novel coating, which prevents blood clots, would be used with J&J's stents - devices which keep blood vessels open after surgery. J&J has 90 per cent of the $1.3bn (pounds 818m) stent market in the USA and a deal using Biocompatibles' coating on every stent would have been very valuable to the UK company.

However Biocompatibles said J&J had decided to limit the collaboration to a new version of its coating to deliver drugs rather than use it to prevent blood clotting generally. J&J has also decided not to distribute Biocompatibles' own range of stents. Widespread use of the coating on stents was a big hope for Biocompatibles, which so far makes only limited sales from using it on contact lenses. Shares in the company have soared from 428p in October to a pounds 14.20 high this year on hopes of a deal.

The company's shares closed yesterday at 732.5p, a fall of 415p wiping pounds 300m off the company's market value at pounds 535m. The price fell as low as 622.5p at one stage yesterday.

Speaking as the group announced interim results, Alastair Taylor, Biocompatibles' president said he was bemused about why J&J, Biocompatibles biggest single shareholder, was not interested in the coating to prevent blood clots. He said there had been no disagreement about price: "Maybe they have some magical coating in their back pocket. We don't think so though. J&J just said they were not persuaded that there is such a big market for an anti blood-clotting product." Mr Taylor said. He said that other US stent companies, thought to include Boston Scientific and Medtronics, were interested in the product: "We are talking to five other stent companies who disagree with J&J's view and who are keen to use the coating for thrombosis. We can help them take market share from J&J. J&J are already losing share in the US because they are not being aggressive enough and they have only 15 per cent of the European market."

Jo Walton, drug analyst at Lehman Brothers said she did not understand J&J's thinking: "I am confused. All the data suggests that Biocompatibles' stents and coatings were top notch and that J&J was in desperate need of such a product.''

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