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Deal making the small highlight as Summit and Nu-Oil make breakthroughs

Published: 09:01 08 Oct 2016 BST

London Stock Exchange

For the junior biotech the Holy Grail is taking a drug all the way from the lab to the market – in the US they call it hitting a home run and the achievement is usually transformational.

Unfortunately, very few home runs have been hit here in the UK, even though we have a very active drug development sector.

That’s because the costs of developing a new treatment are prohibitive as they can run to hundreds of millions of pounds – and of course success is not guaranteed.

Often the next best thing is to find a big brother with pockets deep enough to fund the work required to get a new discovery through the R&D phase to the pharmacists’ shelves.

That’s exactly what Summit Therapeutics PLC (LON:SUMM) managed this week.

It brokered a licensing deal worth more than half a billion dollars with an American firm called Sarepta.

It won’t receive that cash all at once, but at points during the clinical testing of the firm’s potentially breakthrough new drug for Duchenne Muscular Dystrophy, a muscle wasting disease that affects boys.

Summit will get £32mln upfront, followed by £18mln once the last patient in the company’s phase II clinical trial is dosed.

Unsurprisingly, the Sarepta deal moved the dial, pushing the share price 50% higher. Analysts think it will go further.

Looking at the wider market for small-cap stocks, the FTSE AIM All-Share had a decent week as it rose 1.3%. However the blue-chips once again outperformed the smaller companies with the Footsie up 2.1% over the last five trading days.

The week’s runaway stock was Nu-Oil and Gas Plc (LON:NUOG), which essentially rose from the dead.

Off more than 80% in the last 12 months, Nu-Oil skyrocketed on news it has signed up the Norwegian energy services specialist Aibel as a partner for its marginal fields initiative.

By using the latest technology such as unmanned platforms, a consortium of businesses aims to bring uneconomic North Sea discoveries back into production.

Aibel’s involvement as pivotal player has seen Nu-Oil’s share price rise over 400% in the last week. This in turn allowed it raise £700,000 of fresh cash.

Sticking with the natural resources sector, Jersey Oil and Gas PLC (LON:JOG) has enjoyed a decent trot with the shares up 65% following the completion of its deal with another Norwegian firm, Statoil.

The Stavanger-based giant has taken a 70% stake in JOG’s Seaward licences in the North Sea and has assumed responsibility for developing the acreage.

Another week passes and another lump is taken out of Xcite Energy Ltd (LON:XEL), the highly indebted oiler that is undergoing a painful refinancing. A further 38% has been wiped off the company’s market capitalisation.

President Energy Plc (LON:PPC)  was down by more than a third too after it was forced to suspend drilling on a well in Argentina.

Off 58% in the last three months, the selling pressure ramped up on Oxford Pharmascience Group Plc (LON:OXP), whose speciality is reformulating drugs such as over-the-counter painkillers. The stock has lost around 19% in the last week, with no discernible reason for the fall.

The bargain hunters might look at the market capitalisation (£24mln) and spot that Oxford last is sitting on £22mln of cash.

Finally, it was another week to forget for the philatelists’ friend Stanley Gibbons Group Plc (LON:SGI), which lost a further 10% and seen its share price collapse 88% in the past year.

On Monday it posted a £28mln loss for the year to the end of March on revenues of £59mln, after taking one-off charges of £24mln.

As part the results announcement, the group listed a lengthy confession in a section entitled: “What went wrong?” 

“Shareholders deserve an explanation of the combination of events leading to the severely disappointing trading result,” said the group.

The new team wasted no time in pinning it all on the ousted management. Chairman Harry Wilson said the group had gone “badly adrift” under previous directors.

Following a year that saw two profit warnings and it going cap-in-hand to shareholders, the group embarked on a period of aggressive cost-cutting, slashing jobs and overhauling its management team.

It shed almost the entire board, with chief executive Mike Hall and finance director Donal Duff parting exiting in July.

Accountancy firm BDO uncovered a number of mistakes in the way Stanley Gibbons reported revenues from the sale of investment plans in its stamp trading arm.

Subsequently the value of its assets dropped 43% after a restatement of figures from previous years, while its bank debt doubled to £21.9mln.

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