LONDON (Reuters) (By Mark Potter) - Uncertainty over the future of its main backer and the collapse of one of its peers will make it harder for cash-pressed Scottish biotechnology firm PPL Therapeutics (LSE: PTH.L - news)to raise money, according to analysts.
The firm, which hit the headlines in 1996 for cloning Dolly the sheep, may have to heavily discount its planned fund-raising or go to the market in two stages -- or both, analysts said.
A spokesman for the Edinburgh-based firm told Reuters: "PPL doesn't comment on City speculation. However, it is known by the market that it has sufficient funds for the time being and the board is examining a number of funding options."
But analysts said uncertainty over the pharmaceuticals business of Germany's Bayer AG, which owns 16 percent of PPL, and news that Dutch biotech firm Pharming Group NV had filed for receivership could mean PPL will have difficulty raising money before its cash runs out early next year.
"I think they are going to have trouble," said Keith Redpath, biotechnology analyst at West LB Panmure.
PPL, which abandoned a planned 45 million pound ($65 million) fundraising in April due to unfavourable market conditions, needs money to build a 42 million pound plant to manufacture its leading product, alpha-1-antitrypsin (AAT), a protein treatment for emphysema produced in the milk of genetically-engineered sheep.
Its shares, which have underperformed the FTSE All-Share pharmaceuticals sector by around 59 percent since the start of the year, were last flat at 76 pence. This is a far cry from their high of 305p in March 2000, and values the firm at around 42 million pounds.
PROBLEMS MOUNT
Bayer, whose shares have plunged more than 25 percent since it withdrew a leading anti-cholesterol drug last week, is a key partner in the development of AAT. It signed a deal in August 2000 to provide up to $40 million in exchange for exclusive marketing of the product.
The German firm also agreed to guarantee a 15 million pound loan from the Royal Bank of Scotland (LSE: RBOS.L - news) in July, which PPL will use to help finance the AAT production plant.
But Bayer announced this week it might sell its troubled pharmaceuticals division, throwing its support for PPL's programme into doubt.
Sally Bennet at ING Barings noted that Bayer's plasma division -- into which PPL's programme feeds -- was performing in line with expectations and would be attractive for any buyer of the pharmaceuticals unit.
But, she also said any new owner might engage in substantial cost-cutting and that uncertainty over the unit's future was likely to hamper PPL's fundraising efforts.
Last week's collapse of Dutch firm Pharming -- which also makes drugs from the milk of transgenic animals -- could add to PPL's difficulties in raising money, analysts said.
"It's not fair, really. PPL's got a better, more advanced programme than Pharming. But investors are bound to think twice about putting money into any transgenic venture now," said another follower of the company, who declined to be named.
WEATHERING THE STORM
Most analysts agreed PPL would weather the storm.
"They have a good institutional shareholder base and I find it difficult to believe they would just walk away," said ING Baring's Sally Bennet.
But she conceded it would be difficult for the company to attract new investors under current market conditions.
Some analysts suggested the solution might be for the firm to try to raise funds in two stages, rather than aim for one large issue to see AAT through to market in around 2004.
Another option could be a heavily discounted issue.
"Both must be possibilities," said West LB Panmure's Keith Redpath... |
