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Would the last biotech company left in Britain please turn the lights out? This question came to mind after yet another bombed-out biotech company - Oxford Biomedica - attracted a bargain basement bid. Instead of being sold for multiples of earnings, companies are being snapped up at knock-down prices before they become profitable.
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Those who feel biotech firms are selling themselves short can point to events last week, when Oxford Biomedica, whose market capitalisation at the time was £46.5m, received an approach from US-based GeneThera, whose market capitalisation is $230,000 (£120,000). GeneThera was taking advantage of the slump in Oxford Biomedica's share price after the failure of its lead product, cancer treatment TroVax, to achieve statistical significant results.
Meanwhile, Protherics announced that a number of parties had made takeover approaches. There is certainly value in Protherics, but, like Oxford BioMedica, its shares are trading at historically low levels owing to the failure of a key product and regulatory delays.
But even if Protherics does get taken out at a significant premium to its recent share price, that would still be well below its historic share price highs. The same applies to Acambis, which late last month announced an agreed takeover by French pharmaceutical giant Sanofi Aventis for £276m in cash, news that caused Acambis's shares to almost double to 187p. But that's still less than half their 376p level in September 2003. Also, investors have poured close to £120m into Acambis over the past 13 years, so it is understandable that they aren't exactly jumping for joy.
Some companies are fading away slowly due to financial pressure, including Adana, Phoqus and TyraTech (due to problems at its parent XL Tech), and those who aren't under financial strain are under threat of being snapped up by predators taking advantage of a weakened sector.
It's pretty clear that any biotech company showing signs of blockbuster potential is at risk of being gobbled up by a big pharmaceutical group before that potential can be realised. Better value creation is likely when takeovers are based on multiples of earnings. Companies where we can see this happening are Vectura, BTG, Antisoma, Genus, Plant Health Care, Renovo, Abcam, Neuropharm and Biocompatibles.
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