Shares dive as Cantab pulls drug

BY TOM STEVENSON

Deputy City Editor

Paul Haycock, of Cantab Pharmaceuticals, could not believe what he was hearing on Tuesday afternoon. It was a chief executive's worst nightmare come true.

A few hours earlier, he had told investors and the press that the company's leading organ transplant drug was about to start phase three clinical trials, almost the final hurdle for a biotechnology company.

Now his US partner was telling him that the trials were off, the drug had been pulled.

Worse, lawyers advising Baxter Healthcare in Chicago had told the company that it should issue a public statement on the ending of tests on LM-CD45, the drug's code name. Cantab followed suit at midnight and waited for the market to react yesterday morning.

Analysts had reacted well to the previous day's results announcement and the response was predictably dramatic. After opening at 282p, the shares plunged to 162p, their lowest level since floating in October 1993 at 460p.

"Until yesterday our relationship with Baxter had been fine," Mr Haycock said. "Communications last night were not so good."

Ironically, the rapidity with which Cantab's story changed probably saved many investors. They did not have the chance to act on the brokers' recommendations compiled the previous afternoon.

One said: "Cantab has reported 1994 figures somewhat better than our expectations, with a net loss of £4.1m well within the company's budget. Investment in biotech has always required patience, and we believe that 1994 could be the year in which, for Cantab shareholders, this patience is rewarded."

What actually happened was not unusual for a drug development company whose stock in trade is research into drugs, most of which will never make it to the market.

As Mr Haycock said: "Glaxo could start trials on a drug tomorrow and pull them next year and you would never know."

Cantab's problem is that as a small, recently floated company with only a handful of drugs in the pipeline, the fate of each one matters a great deal. Especially when the treatment in question, while not the company's biggest, was the furthest advanced down the demanding list of trials demanded by the regulatory authorities.

LM-CD45, designed to prevent rejection of transplanted kidneys, had just completed the second of three phases of trials in Britain and was in the process of completing a double-blind placebo trial in the US.

Phase three trials, in which the drug is tested on a large number of patients, were scheduled to start this year.

According to Baxter, however, the drug had no clinical advantage over the placebo used in the trial.

It said there was no point in proceeding to the expensive third-phase trial.