Companies: SPH   

In a bid to boost margins, niche drug development backer Sinclair Pharma is negotiating potential acquisitions worth £4m or more among drug distribution companies. AIM-quoted Sinclair's strategy has been to invest in the late-stage development of new drugs whose intrinsic merits have been clouded by procedural, regulatory or financial snags, with a focus on areas where a small company can more easily steer the process, such as dermatology, oral health and cancer complications. The Surrey-based company, which will take its products to big companies for ultimate distribution, has 13 products in Europe, nine in the USA and ten in the pipeline over the next two years. Chief executive officer Dr Michael Flynn, who says Sinclair is now making a push into eye treatments, enthuses about Decapinol, which combats gingivitis, associated with bleeding gums, rotting teeth and bad breath affecting large sections of the population, and is adaptable to other parts of the anatomy. He argues Decapinol could carve a place in the mouthwash and toothpaste markets, together worth an estimated £8.5 billion a year worldwide. Flynn cites other products, such as mouth ulcer treatment Aloclair, now launched in 33 countries, and Atopiclair for eczema, newly launched in the USA with 'positive feedback' already. But to sustain growth, he says the company wants to buy into distribution, where margins are much higher, at home or abroad, and is talking to possible targets. At this stage in its development Sinclair is not making money, having lost a hefty £2.7m in the year to June 2004 and £2.1m in the six months to December, though Flynn says full-year figures to June 2005 'will not disappoint'. The company still had £6.7m cash at the end of June, to help with any acquisition it does make. Floated at 115p at the end of 2003, the shares now stand at 130.5p. They are not without risk but, if some of its investments look like paying off and its impending acquisition makes sense, Sinclair could repay a bold, medium-to-long-term punt.