volutec Open To Offers As Key Drug Fails Test

Biopharmaceutical company Evolutec Group PLC (EVC.LN) said it would be open to sale offers Wednesday after its key development drug rEV131 failed to produce results in a key trial.

Chief Financial Officer Nicholas Badman said the trial result means all options are on the table, including a potential sale of the company: "Someone may seek to take the whole company," he said, adding: "We are very much open to all routes."

Badman's comments follow an earlier announcement by the company that in a Phase II trial on reducing allergic inflammation after cataract surgery rEV131 performed the same as a placebo.

At 0930 GMT the shares were down 3.5 pence or 18% at 14.75 pence, leaving the company with a market value below GBP4 million. The group listed in August 2004 at 125 pence per share.

The compound rEV131 was being tested as a treatment to combat inflammation after post-cataract surgery, but the company's statement Wednesday said the trial found "no significant differences" between rEV131 and the placebo.

In December Evolutec's shares slumped 70% in a day's trading after negative results using rEV131 to treat hay fever were announced. Evolutec is now scrapping investment in the drug. However it is pursuing another compound, rEV576, which it says has shown potential in therapy for myasthenia gravis and Guillain-Barre Syndrome.

The CFO would not say whether the company has received any expressions of interest, or whether it has approached potential buyers, nor would he give a timeline for a potential sale of the company: "There is no time line but we are going to actively pursue [options], we will do whatever."

The CFO said the group has enough cash for the foreseeable future and that the company is undervalued: "We're worth a lot more than our current share price suggests, we've got the cash and there's a lot of potential value in rEV576."

Nomura Code analyst Gary Waanders said the trial result leaves little value in the company: "This was the supporting indication for their lead product, that's gone now so there's not much in their pipeline of any real value," Waanders said, adding: "It's pretty hard to see where they might go from here."

Waanders highlighted that the group is trading at a discount to its cash reserves of GBP8.7 million or 33 pence per share, and said it may be a target for a biotechnology company looking to top up its cash.

The analyst does not have a rating on the company.

The compound rEV131 had been touted as a potential blockbuster, and in October the group raised GBP2.8 million to fund the trials of the drug.

The Reading, UK based company's drugs are based on compounds found in the saliva of blood-feeding ticks. Ticks can remain undetected on their hosts for weeks and the company's products aim to use compounds to treat allergic, autoimmune and inflammatory diseases.

The company's only other pipeline drug, rEV576 is at the preclinical stage of trials for its use as a treatment against muscle weakness, or myasthenia gravis. It is also being tested as a treatment for Guillain-Barre Syndrome, a nerve system disorder and against asthma and heart attack.