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UK biotech suffers in 2007

The UK biotechnology sector did not deliver the expected novel medical treatments in 2007, while its financial reputation is damaged by falling share prices, slow drug development and investor scepticism

According to the UK newspaper the Financial Times (FT), the UK biotechnology sector is not delivering the expected novel medical treatments, while its financial reputation has been damaged by falling share prices, slow drug development and investor scepticism.

The FT cites a report by broker company Seymour Pierce. Analysts at the firm, said the poor state of the credit markets and general negative sentiment have meant 'disaster for biotechnology in the UK'.

In 2007 the UK's 47 biotechnology stocks, which constitute Seymour Pierce's UK Drug Discovery and Development Index, underperformed the FTSE All Share by 36.1 per cent.

Thirty-eight of the companies in the Index suffered decreases in market capitalisation. The negative view was not even softened by the high-profile licensing deals signed by Antisoma, Oxford BioMedica and Renovo, whose initial gains have been erased. Shares in Antisoma and Oxford BioMedica have dropped by over 40 per cent in the past six months while Renovo's stock has fallen more than 30 per cent.

The report estimates that biotech stocks are trading at an average of a 51 per cent discount of their consensus value. Some industry observers see some upside in the short-term and add that the sector may have bottomed out and gains could be made in 2008. However, the uncertain markets and a dip in confidence could continue to reduce share prices.

High profile failures in 2007 were Vernalis' menstrual migraine treatment Frova and a key clinical study by Allergy Therapeutics was halted by the FDA after a rare ADR was reported. Additionally, the FDA asked UK-based GW Pharmaceuticals to carry out additional trials for cannabinoid pain treatment Sativex.

The report also says that a mere nine out of the 47 companies on the index gain value in 2007, while 24 of them saw approximately 30 per cent of their market value wiped off. Vernalis, whose share price fell almost 90 per cent in the past six months, and CeNeS which lost 70 per cent, were the worst performers in the year.

10th January 2008

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