Business Weekly - Cambridge, UK

Sareum's contract drug discovery work is struggling as pharma cut backs on R&D

While the board says it has received approaches from parties interested in its drug discovery business and in-house cancer programs, it has triggered a critical review of the available options in the face of a cocktail of difficulties, prompting a shares fall of almost 12 per cent to 0.375p.

Cutbacks on research spend – principally by American partners – has been one of the major problems. Sareum has already received approaches from parties interested in its drug discovery business and in-house cancer drug discovery programmes. A total or partial sell-off are high on the agenda.

Formed in August 2003, Sareum employs a structure-based approach to the discovery of new drugs for the treatment of cancer. In parallel, it provides specialist drug discovery capabilities to partners in the pharmaceutical and biotechnology industries. It has historically been funded via fee-for-service-contract revenues and funds raised through equity issues.

The board has cited “difficult trading conditions resulting from a reticence in the research service sector, particularly in the US, to use cash reserves to sponsor new research activities until financial conditions improve.

“Combined with a high level of M & A activity within the pharmaceutical and biotechnology sector, this has tended to interfere with the decision making process for the initiation of new research programmes.”

Its statement to the market also cited “the current depressed share price in common with most small cap plcs” and added that the board had received approaches from parties interested in acquiring key elements of the business.

The statement added: “The board will be considering a number of options including; the sale of all or part of the business, the raising of additional equity funds, entering into partnering arrangements, or the acquisition of a suitable business to give the company additional critical mass. The board has appointed Grant Thornton Corporate Finance as financial advisers to assist with this process.”

Sareum joined London’s AIM market in October 2004.

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