Analysts at KBC Peel Hunt have been trying to sort out the winners from the losers in the British biotech sector.
In a new note on the sector, analyst Dr Paul Cuddon said:
"There are two types of biotech companies in the UK at present: those with cash, and those without. Currently, the capital markets are likely to provide the filter that separates the strong from the weak, although some valuable assets might also be lost.
"Six companies have already gone into administration, and we believe a further 24 (based on the most recent reported accounts) are running on less than six months' cash [more than a third of the sector]. The 24 companies have had more than £654m in equity financing, spend more on [overheads] than on value-adding R&D, and will need more cash soon. This category includes Alizyme, e-Therapeutics, Reneuron, Silence and Summit.
"In contrast, 35 biotech companies are well capitalised until at least 2010, many of them with assets in or close to commercialisation. These companies need to deliver on their promises and adapt to the current market conditions. This means extracting value from non-core assets, and conserving cash where possible. Value in Antisoma, GW Pharma and Vectura is now being created through the cash of senior partners, while BTG is extracting value from its pre-clinical portfolio. These companies maximise value for shareholders.
"It is widely acknowledged that Big Pharma is increasingly reliant on biotech for new product development, but we doubt Big Pharma will be UK biotech's knight in shining armour. Pharma companies scout for talent all over the globe, and while there are some attractive assets in the UK pipeline, we little reason for pharma to act now: assets may be cheap, but does the market need them?"
Dr Cuddon is positive on Antisoma - down 0.25p at 22.75p - Minster Pharmaceuticals - steady at 14.5p - and Vectura - up 1.25p to 48.5p. But he is negative on Ark Therapeutics - up 1p to 40p - Alizyme - steady at 9.25p - Proteome - up 0.5p to 21.5p - and Skyepharma - down 1.5p at 152p.
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