Investment Column: Rising losses at Chiroscience

Most biotechnology companies have still to sell a single product, yet many have proved brilliant at marketing themselves. Chiroscience is a case in point. The group has racked up ever-increasing losses, which grew by another 61 per cent to pounds 18.7m in the year to February and are now 15 times the level of four years ago. Despite that, the group still had pounds 51.4m in the bank earlier this year, raised from cash calls on its shareholders, and, even after yesterday's 17.5p fall to 335p, it has a heady market capitalisation of pounds 354m.

The company has not been shy about selling the virtues of its drugs pipeline, which includes a look-alike version of British Biotech's Marimastat anti- cancer drug and a non-steroidal asthma drug based on so-called PDE IV inhibitors. It is already claiming its matrix metalloproteinase drug for cancer and its asthma treatment offer reduced side effects. Yet the comparisons are being made against drugs some years away from the market, while the company's own treatments will only start to be tested in humans later this year.

More tangible evidence of progress came yesterday with news the ChiroTech subsidiary had become the first part of Chiroscience to break into the black, recording profits of pounds 1.2m last year. The business merely provides intermediate chemicals, admittedly sophisticated ones, to other pharmaceutical companies.

Chiroscience is promising an update next month on progress at Darwin Molecular, the US drug discovery operation acquired last year in another marketing coup, bringing in as it did Microsoft founder Bill Gates as a shareholder.

But more important is the outlook for Levobupivacaine, a more chemically pure version of an anaesthetic produced by Astra. That is on course to be submitted for approval in Europe this year.

But with so much riding on that single product, the shares remain speculative. A further cash call is also a real prospect, given that operating losses are set to rise to pounds 25m this year.