Phytopharm raises fresh funds from investors

Phytopharm, the biotech company trying to develop drugs from plants, has succeeded in raising £10m from shareholders, six weeks after plans for a £24m fundraising collapsed at the last minute.

Phytopharm, the biotech company trying to develop drugs from plants, has succeeded in raising £10m from shareholders, six weeks after plans for a £24m fundraising collapsed at the last minute.

Then a Japanese partner abandoned support for the company's most advanced drug, Cogane, a potential treatment for Alzheimer's disease, sending Phytopharm shares into freefall.

The replacement fundraising announced yesterday was less than half the size of the original, and shares were placed at 125p, compared to the 180p originally planned.

Richard Dixey, Phytopharm's chief executive, said the company needed less money now because it had decided not to carry out trials of two of its drugs in Parkinson's and motor neurone disease, trials that would have cost £5m apiece. It would also not be seeking US investors in the new reduced fundraising, which has been underwritten by Canaccord.

However, it still needed cash to bolster the balance sheet before selling the global marketing rights to Cogane later this year, Mr Dixey said. "It means that when we have new trial data on Cogane and we begin negotiations with multi-national companies, they will not be looking at us and seeing that we cannot afford to develop Cogane any further ourselves."

This strengthening of the company's negotiating hand helped push Phytopharm shares up 4p to 135.5p yesterday.

When Yamanouchi formally returned the Japanese rights to Cogane to Phytopharm last month, it was the second disappointment caused by a licensing partner so far this decade. The US pharmaceuticals giant Pfizer stopped work on an obesity drug which Phytopharm had developed.