18 - 24 January 2001

Investors Corner

The Market
On Friday, London shares put on a strong closing spurt to the last session of the week, recovering from a mid-afternoon dip following stronger-than-expected US data, as sentiment was boosted by Nasdaq’s return to strength when the markets closed in London.
The FTSE 100 index closed up 50.6 points at 6,165.5, but well off its 6,178.5 morning high, with all of the wider indices posting good gains. The techMark was particularly well-bid, up nearly 85 points at 2,555.11. By the close of trade, a hefty 2.443 billion shares had changed hands in 104,878 transactions – swollen by hefty volumes in Vodafone and Aegis.
At the close of trade in London, Wall Street was putting on a mixed performance: the DJIA was trading down 15.86 points at 10,592.47, while the Nasdaq Composite index was 44.57 higher points at 2,685.14.
Traders were less marked by talk that the Federal Reserve might not cut rates for the second time this month when it meets on 30 January at the session’s end, stating that the data did nothing to change the overall view that consumer spending will continue to weaken. US retail sales rose unexpectedly in December, led by increased business at auto dealers, clothing retailers and grocery stores. Sales rose 0.1 per cent to $271.3 billion last month following a revised 0.5 per cent decline in November.
The consensus forecast of Wall Street economists was for a fall of 0.4 per cent. The overall producer price index was unmoved against November’s 0.1 per cent gain – slightly weaker than expectations. However, the core rate which excludes food and energy was stronger than expected at three per cent, showing its largest increase since May. Economists expected both headline producer prices and core prices to rise 0.1 per cent in December.
On Friday, shares in London opened the session in positive mood, with the FTSE 100 index seeing good early gain as players celebrated the strong showing on Wall Street overnight. Gains were extended in a solid midmorning session, boosted by a strong technology, media and telecoms sectors, as investors piled back into the market following Nasdaq’s meteoric performance overnight.
TMTs continued to dominate the FTSE 100 index leader board mid-afternoon and at the close, as investors continued to be drawn to the sector after Nasdaq’s sparkling. CMG topped the risers at close, up 83 at 845, with Logica up 100 pence at 1600 pence, Autonomy 123 pence higher at 1985 pence, Energis 38 pence firmer at 570 pence and ARM Holdings gained 30-1/2 pence at 550 pence. Market heavyweight Vodafone Group saw gains of 9-1/4 pence to 236 pence, while Telewest added 4-1/2 pence at 136 pence.
Retailers remained in the spotlight as a slew of companies provided their take on the Christmas trading period. Shares in GUS were 18-1/2 pence higher at 481 pence, bouncing back from a drop following disappointing home shopping revenues disclosed in its trading statement; the group shrugged off Morgan Stanley Dean Witter’s downgrade to “underperform” from “neutral”, with a 420 price target. CSFB earlier advised to “hold” the stock, setting a 600 pence sum-of-the parts value.
Supermarket giant Sainsbury rose 7 pence at 356 pence after this morning’s trading update, which showed like-for-like third quarter sales up 0.7 per cent, but – more encouragingly – a bumper Christmas. Traders expressed their relief that there was no profits warning with the update, though many brokers remain cautious on the supermarket chain’s near-term performance. WestLB Panmure repeated its “sell” advice and cut its price target to 320 pence from 350 pence, but Dresdner Kleinwort Wasserstein was a fan, rating Sainsbury an outright “buy”.
However, Safeway’s shares were down 8 pence at 298 pence – ignoring “buy” advice from WestLB – and Tesco lost 6-1/4 pence to 257-1/2 pence, also shrugging a hefty upgrade to “add” from “reduce” from Credit Lyonnais and a “buy” recommendation from SG Securities. The underlying trend continued to show pressure on “old economy” stocks – despite profit taking as Nasdaq opened – as the market renewed its tempestuous flirtation with all things technological.

Powderject Pharmaceuticals
PowderJect, the drug delivery group, reported that Lidocaine remains on target for pivotal Phase III studies next year. The group also announced that revenues were approximately £22 million due to record sales of Fluvirin(R) influenza vaccine and strong performance in contract R&D and manufacturing, while gross margin was on target and cost savings were coming through as planned.
The company anticipates continued strong performance through the second half of the year, with revenues expected to reach over £30 million and the burn rate to reduce significantly. Cash reserves have increased over the past two months to £58.4 million as at 30 November 2000 and the board expects the total cash position to be significantly strengthened at the year end.
With respect to PowderJect Lidocaine, during the last six months, the company has advanced the series of configuration studies, with a clinical study completed in adults. Another clinical trial scheduled for later this month and further studies in adults and paediatrics planned in the coming months.
This programme is designed to confirm the appropriate device operating conditions to take forward into Phase III by utilising a range of sophisticated test models correlated with clinical data to fine-tune the PowderJect device. In addition, to continuing this technical work, the company intends to hold further meetings with the appropriate regulatory bodies in preparation for the important final phase of clinical testing.
Powderject’s second programme in the multi-protein collaboration with Serono has now reached an important milestone, generating a £1 million payment for PowderJect. Following encouraging initial testing, PowderJect and Serono have decided to move forward with the development programme for Rebif(R), recombinant beta-interferon, delivered via the PowderJect(R) system.
Meanwhile, Powderject’s ongoing clinical programme with the first product in the Glaxo Wellcome collaboration, hepatitis B DNA vaccine, highlights the continuing progress of this important partnership. The current clinical study, which is being conducted by Dr Greg Poland at the prestigious Mayo Clinic, is evaluating the novel PowderJect product in patients who are non-responders to existing commercial vaccine despite receiving multiple doses, and in subjects who responded initially to commercial vaccine but whose antibody levels then dropped below the protective level. Preliminary indications suggest that the study results are encouraging, and a full report on the complete results is planned for next year.
Glaxo Wellcome has purchased a further DNA vaccine licence, increasing the total number of licences held to six. In addition, Glaxo Wellcome has renewed and retained options over all of the other five fields in the original agreement, which covers up to 11 powder-form DNA vaccines. As a result Glaxo Wellcome will pay PowderJect $2 million in licence, option and milestone payments.
The clinical trial of the Malaria DNA vaccine, conducted by Professor Adrian Hill at Oxford University, shows that the DNA vaccine followed by the MVA vaccine produced preliminary evidence of partial protection against malaria in some subjects. While this project remains at an early stage, these initial results are encouraging for Powderject.
Powderject made it clear that development programmes that are outside its strategic focus will not receive significant resources unless major progress is made. These programmes include levobupivacaine, calcitonin, oral lidocaine, migraine and prostate cancer. Two programmes, insulin and growth deficiency, have only a partial fit with the company’s strategic focus and will not receive PowderJect investment, but will be progressed if strategic development partners are found.
In parallel with the strategic portfolio review, Powderject has undertaken a significant research programme re-evaluating the potential market for PowderJect Alprostadil. Its most recent clinical study, reported last year, demonstrated an important proof-of-concept for the product in patients. However, the impotence marketplace has continued to undergo dramatic change. Despite predictions that non-oral treatments would account for 30 per cent of a rapidly growing $1 billion market, alprostadil sales have declined significantly since the launch of Viagra.
Analysts believe that Powderject has done well in working with strategic partner but its greatest achievement yet would be the commencement of Phase III trials for Lidocaine.

British Biotech
British Biotech, the drug development company, announced that Marimastat, which is an MMPI in development as an anti-cancer agent, has been licensed to Schering-Plough. Five pivotal studies have reported results and each has failed to meet its primary end point. The results of two additional Phase III studies in patients with small cell lung cancer are expected in the first quarter of 2001 and are likely to determine the future for marimastat.
BB-3644 is a second-generation MMPI for cancer which is also subject to the collaboration with Schering-Plough and has shown better tolerability than marimastat in preclinical models. A Phase Ib, maximum tolerated dose, study is under way in patients with advanced cancer to determine whether the better tolerability seen in preclinical models can be reproduced in humans. Results from this study are expected in the first quarter of 2001 and are likely to determine the future for BB-3644 as a back-up for marimastat.
Meanwhile, BB-10153, which is a genetically engineered protein for the prevention and dissolving of blood clots, is also being developed as a potential treatment for cardiovascular disease, including heart attack and stroke. In preclinical models, BB-10153 shows prolonged duration of action and less propensity for bleeding than currently approved therapies. A Phase I study, in healthy volunteers, showed BB-10153 to be well tolerated. Manufacture of supplies for Phase II is under way with an external contractor.
The company’s development partner in the field of inflammation, Serono, has an option to obtain exclusive rights to develop and commercialise BB-2827, which is an MMPI with activity against collagenase and is a potential treatment for rheumatoid arthritis, following completion of certain clinical studies by British Biotech.
British Biotechís BB-10901 (huN901-DM1) is a targeted cytotoxic for the treatment of small cell lung cancer (SCLC). BB-10901 is a tumour activated prodrug consisting of a monoclonal antibody (huN901), which targets SCLC cells, coupled to a highly potent cytotoxic agent (DM1). A Phase I study in cancer patients is scheduled to begin in the first quarter 2001. British Biotech acquired the rights to commercialise BB-10901 in Europe and Japan from ImmunoGen and is responsible for conducting the clinical development for North America, EU and Japan.
Following a successful half-year in which the company signed four important collaborations and further advanced the development pipeline, the turnaround at British Biotech continues to gain momentum.