BioWorld International Correspondent

SYDNEY, Australia - Investors learning of a favorable research report on Metabolic Pharmaceuticals Ltd. pushed the share price up sharply last week, but the stock promptly slumped when the company revealed that it had paid 100,000 options for the report from Cohen Independent Research Group.

The company's shares jumped A62 cents to A$1.62 (US$1.16) last week when traders apparently discovered the report, available on San Rafael, Calif.-based Cohen's website, which declared that the stock was worth a base price of $3.55 and at least $2.25. Metabolic's shares slumped A39 cents after the company said it paid for the report. The stock finished the week at A$1.14.

Metabolic CEO Chris Belyea said that the company had not been expecting the report to be released on the website and was concerned that day traders might believe that the report had a "higher level of independence" than was the case.

He said the company announced in March that it planned to pay for the report and services from a New York-based technology firm and other consultants, in preparation for a planned initial public offering on Nasdaq in 2005.

He said that total payment included cost reimbursement and 400,000 options currently unlisted, with an exercise price of A$1.25 set to expire in 2005. Of those, about 100,000 were used to pay for the report, which was produced as part of the company's efforts to raise its profile in the U.S. market.

Belyea said that paying for reports is common in the U.S. and also occurs in Australia. The reports have credibility in that researchers would not produce one about a company that they considered as having no prospects, he said.

In Australia, reports on listed companies most often are produced by the research sections of major stockbroker houses. Belyea commented that he would be happy if "day traders left us alone." He said that the company's share price had jumped to A$1.50 last August on no news, apparently in anticipation that the company would release favorable results.

The company expects to release in November the results from an obesity drug now in Phase IIb trials, involving 300 obese adult Australians.

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