Drug FDs seek biotech deals

AstraZeneca’s recent move for small biotechnology company Cambridge Antibody
Technology is the beginning of further acquisition activity in the sector,
according to analysts.

Finance directors and pharmaceutical company boards have developed an
interest in biotech companies, as it is often easier to buy in technology than
develop new compounds in-house because of internal regulations.

‘The pharma companies are a bit like oil tankers, in that they find it hard
to change direction very fast. It’s often easier to buy in a brand new piece of
technology. It also gives them the ability to cut through bureaucracy,’ said
Brett Pollard, life sciences analyst at Numis.

The interest in biotechnology deals comes after a highly successful year for
the sector, as it raised record amounts of capital and gained increased

According to Ernst & Young’s global biotechnology report, revenues in the
sector grew 18% in 2005 to a record high of $63.1bn (£33.7bn). Biotechnology
also raised $19.7bn – its highest level since the 2000 stock market bubble.

For UK FDs planning to dabble in the biotech market, however, there are a
number of risks that need to be managed. The European market has been far less
buoyant than in the US, raising only $4bn.

Pollard warned that raising capital to pursue takeover targets in the UK was
a difficult task. He said it was much easier for US companies to access finance,
which meant that UK FDs were under pressure because they had to raise capital
every year.

‘We don’t often set our companies up to be competitive on a global scale,
because every 12 to 18 months a lot of the companies are having to come back to
the market and do another road show,’ Pollard said. ‘If you put that together
with the interim preliminary results then they get less and less time to manage
the companies.’


FTSE 100

BAA FD Margaret Ewing and her fellow board members are expected to offer a
£1bn cash payment to investors this week, as the airports operator continues to
stave off a hostile bid from Spanish infrastructure group Ferrovial. Ewing is
expected to source the funds for the payment by increasing debt, which currently
sits at £5.5bn, rather than asset sales.

Baugur, the Icelandic investment company, is believed to be building up a
stake in struggling supermarket company Morrisons, which holds its AGM today.
Morrisons has battled to integrate Safeway since acquiring its rival, but the
rumoured interest from Baugur will boost the company’s fortunes. The Icelandic
group has a good track record for successfully investing in undervalued

FTSE 250

Nasdaq has increased its stake in the London Stock Exchange to 25.1%. The
news emerged shortly after Euronext and the New York Stock Exchange announced
that they were going to merge and create the world’s only/first transatlantic
stock exchange. The move opens the way for Nasdaq to bid for the LSE, without
competition from its US rival.

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