Shares in UK biotechs have taken not so much a kicking as a full-scale assault by a gang of knife-wielding thugs in the past year. Companies such as Oxford BioMedica and Renovo, which a year ago looked to many like the sector’s great white hopes, have seen their share price plummet by almost 90 per cent. Several of the more attractive companies in the sector – the vaccines specialist Acambis, Protherics and the consumer health-focused Sinclair Pharma – have either been bought or are likely to be soon. This will make the lack of mid-cap biotech companies in the UK even more pronounced.

Last November, it looked as though ProStrakan might be another victim of the malaise. Despite having revenues from existing drugs – rare in a UK biotech – its share price languished at less than half its 2006 peak of £1.23 for months. It has recently crept up to about 90p as investors cautiously return to the sector. This positive momentum is likely to continue.

ProStrakan’s interim results yesterday showed turnover had gone up by 26 per cent to £26.4 million, boosted by a strong euro. Combined sales of Tostran, its testosterone replacement therapy; Rectogesic, an ointment for anal fissures; and Droperidol, for postoperative nausea, grew by 73 per cent during what analysts at Landsbanki called an “active and successful” six months.

Although the company is still loss-making, the management expects to turn a profit for the first time next year, with 2010 the company’s first profitable full year. It aims to achieve this by selling a new portfolio of medicines in the US, the most lucrative pharmaceuticals market, starting later this year. Abstral, which treats pain from chemotherapy, is one of several drugs tipped as potential $100 million sellers.

Wilson Totten, the chief executive, who was previously head of research and development at Shire, that rare success story, has steadily brought more of his former Shire colleagues to ProStrakan, with hopes of emulating the larger company’s sales.

Recruitment for the new US sales force appears to be going well, with 1,700 applications for 67 positions, a measure of recent redundancies in pharmaceuticals sales.

There has been no great fanfare about its products, probably because it does not aim for the blockbuster-or-bust approach of many other biotechs. The medicines it buys in from other companies are often for rather unglamorous conditions, or niche areas such as postoperative care, rather than headline-grabbing cures for cancer. The classic biotech model of early-stage research on one or two drugs, while hoping that a big pharma company will agree to sponsor the drug through large-scale clinical trials, does not seem to interest ProStrakan management, which is what makes it a relatively defensive stock in a volatile sector. Buy at 100p.

Amlin

What’s the connection between insurance and sword-swallowing? They both deal with risk while hoping to avoid catastrophe. Amlin, a Lloyd’s of London insurer and reinsurer, yesterday reminded the market of the risks as first-half profits sank by 26 per cent to £137 million.

Investment returns were hit by the storms that have lashed financial markets this year, while the company also had to pay out for natural disasters including the Chinese earthquake, floods in the American Midwest and the US tornados.

Amlin has a large exposure to natural disasters, catastrophe cover accounting for a third of its first-half renewal book. So it was perhaps a slice of luck that its two biggest catastrophe-related losses added up to a relatively modest £10 million.

Out of the storms, Amlin’s core insurance business has remained strong, with a combined ratio (claims paid versus premiums taken) of 67 per cent and business retention rate of 85 per cent applauded by analysts. Its underwriting margins have outshone other insurers.

The company has also pruned its slowing aviation insurance business to just 4 per cent of gross written premiums. Amlin shares should be underpinned by a continued buyback programme.

A dark cloud on the horizon? Yes, Amlin chief Charles Philipps admits that profitability is likely to come down because of the upheaval in the financial markets. Hold.

SIG

As the UK property market and construction slow, the share prices of many companies linked to construction have plummeted. SIG, the insulation and roofing maker, has taken a hammering in the past year.

This may not have been justified. The company, formerly known as Sheffield Insulations Group, is exposed to the fortunes of the property market in the UK and most other European countries, which is less than ideal. It suffers particularly from its exposure to the Irish residential market, currently in a worse state than the UK’s, and reported yesterday that like-for-like sales in Ireland fell by 17.1 per cent in the first half of 2008.

However, SIG will benefit from new UK regulations on insulation, aimed at conserving fuel and power. Its sales to nonresidential customers – two thirds of its market outside Ireland – have remained robust and it reported revenues of £1.49 billion for the first half, a rise of 2.5 per cent on a constant currency basis.

Net debt has risen by £211 million to £640 million after a series of small acquisitions, which should help the group to weather tough times.

While Wolseley, the building materials and plumbing group, has risen by 20 per cent relative to the FTSE all-share index in the past month, SIG has underperformed the index by 3 per cent in the same period. It now looks cheap at yesterday’s closing price of £4.87.

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