BioWorld International Correspondent

LONDON - Shares in PowderJect Pharmaceuticals plc surged by 62 percent to £4.15 last week after the company confirmed it had received "preliminary approaches from certain parties" regarding a potential offer for the company.

While acknowledging it is in play, PowderJect would not confirm reports that it was an offer from Chiron Corp., of Emeryville, Calif., of £5 per share, valuing the company at £450 million (US$701 million), which prompted the increase in the share price. The Oxford-based company also refused to make any comment on other names, including GlaxoSmithKline plc and Shire Pharmaceuticals plc, which were reported subsequently to have made approaches.

Rob Budge, director of corporate communications, also told BioWorld International he could not confirm if the preliminary approaches were under discussion or not, saying the company had nothing to add at this stage (Monday morning).

Before last week's rise, shares in PowderJect had lost more than half their value this year, falling from £5.86 in January to below £2.50. While quoted biotechnology peers have seen similar falls, PowderJect's share price was hit in particular by the forced recall of supplies of its tuberculosis vaccine.

PowderJect said it is the largest independent vaccines company in the world, with a range of traditional vaccines, plus a leading position in research and development of DNA vaccines. This would make it a good fit for Chiron, which also has a strong vaccines division, with sales of US$126 million in the third quarter. Chiron also made no comment on the reports of a bid for PowderJect.

Keith Redpath, analyst at WestLB Panmure, said the possible bid for PowderJect highlights his view that there is significant value in European biotechnology, which is unrecognized by the market but is clear to the industry.

"[In February] we suggested that cash-rich U.S. companies would view the undervaluation of the European sector as a buying opportunity. We also identified vaccines as ripe for consolidation," he said.

While the Nasdaq biotech index was down 41 percent on the year to mid-October, the WestLB pan-European index is down 51 percent and the London Stock Exchange techMARK mediscience index is down 61 percent.

"On the basis of multiples, many close-to-profit European biotechnology companies are now woefully undervalued compared to the U.S., and would represent good buys, even at a significant premium to current prices," Redpath said.

Redpath said Acambis plc and Protherics plc are among other UK companies that are well funded with products, good visibility of earnings and rapid growth, which could seem attractive to an industry buyer. He added that R&D-stage companies that might be attractive on valuation grounds include Cambridge Antibody Technology plc, KS Biomedix plc, Alizyme plc and Vernalis plc.