A billion of paper

Eye on dilution

On the other hand, debt brings other burdens. Investors seemed more interested in the potential dilution through SEPR's convertible offering than its deal with Eli Lilly to develop fluoxetine, a modified form of an active ingredient found in Lilly's Prozac antidepressant (see B5).

After hitting an intraday high of $95.25 on Monday after announcing the Prozac deal, SEPR pulled back to close down $3.375 at $84.625 on the week.

Based on the fixed conversion rate of $124.875, 2.4 million SEPR shares underlie the debt offering. If fully converted, SEPR's share base would increase by 8 percent to 30.7 million shares.

On the other hand, the Prozac deal could bring SEPR a revenue stream as early as 2002. Worldwide sales for Prozac in 1997 were about $2.6 billion. R-fluoxetine is in Phase I in the U.S. and the companies expect to finish clinical trials by 2001.

"Prozac has the highest sales of any of our deals to date, but it is not necessarily our biggest deal to come," said CFO David Southwell. He said that SEPR's desmethylsibutramine, a version of Knoll's Meridia sibutramine to manage obesity, could rival the Prozac deal. (S)-sibutramine is in preclinical development.

SEPR said its pipeline includes 19 Improved Chemical Entities (ICEs) whose parent drug sales in 1997 totaled $14.5 billion.

For the nine months ended Sept. 30, SEPR reported a net loss of $59.1 million ($2.10) on $13.8 million in revenues. But adding the $300 million of notes to its $228.8 million in cash at Sept. 30 gives SEPR over a half a billion in cash.

Previous SEPR deals include Allegra, which is marketed by Hoechst Marion Roussel to treat seasonal allergic rhinitis; Norastemizole, in Phase III development to treat allergic rhinitis with Johnson & Johnson; Desloratadine, in Phase III development to treat allergies with Schering-Plough; and (+)-norcisapride, in Phase I trials to treat nocturnal heartburn with J&J.

Not weighed down

While other biotech stocks continue to feel the winter chill that is gripping the British sector, Celltech (LSE:CTP) shareholders have been able to bask in an autumnal glow. Last Thursday, CTP advanced 12.5p to 435p as the market responded to the news that CMA-676, its acute myeloid leukemia product, is making promising progress in clinical trials (see B10).

At the company's annual meeting, CEO Peter Fellner revealed that CMA-676 is on track for submission in the U.S. in mid-1999.

CTP closed the week up 20p at 430p, making it the U.K.'s third largest bioscience company with a market capitalization of £331million (US$550 million). The stock is up 67 percent from 257p since Sept. 18, during which the BioCentury London Index rose 8 percent.