Bottom Line: Celltech limits risks

BIO-TECHNOLOGY stocks are hardly for widows and orphans, but Celltech is showing how to limit the risks with its latest pounds 31.5m collaborative tie-up with Merck - the biggest yet with a British bio-tech company - to develop and market a treatment, known as CDP 840, for asthma.

Nothing illustrates better the lack of wisdom of Synergen, whose attempts to bet the company, by going it alone with its Antril septic shock drug, fell foul of the US authorities in final clinical trials this week.

Collaboration means that small bio-tech companies give away 100 per cent of future profits on a drug in return for a royalty - in this instance maybe 11 to 15 per cent of sales - and enough cash and distribution channels to get the product through clinical trials and on to the market.

Celltech has negotiated an interesting wrinkle by obtaining an option to participate in future profits. In a dollars 4bn-to-dollars 5bn asthma market growing at 15 per cent a year this could be a lucrative kicker.

The Merck deal underpins Celltech's already strong cash position - it has enough funds to last at least three or four years - at a time when US rivals are running out. Up 10 per cent to 209p the shares look a good long-term bet.