Shares in small cap pharmaceutical firms shoot higher with analysts citing a knock-on effect from cancer drug specialist Sareum's positive results from its pre-clinical studies into one of the most common forms of adult leukaemia, published on Monday.
'It's one of these periods of irrational waves of exuberance,' Robin Davison, analyst at Edison Investment Research, said.
'Sareum's had some good results but these are very early stage results and there may have been a misunderstanding.'
AIM-listed Sareum's shares have rocketed more than around 900 percent in 2011 and are up over 70 percent on Wednesday, boosted by excited chatter on Internet message boards.
The company says on Wednesday, in reaction to the share price move, that it is not in advanced stages of discussion with a potential partner and there is no certainty the results will lead to a licensing agreement.
Davison says the news has had a knock on-effect for similar companies in the small-cap arena, citing Nextgen, up 150 percent, ValiRx 29 percent higher, and Physiomics 83 percent better off, as investors go in search of a bargain.
'There has been a recovery in the sector which has endured despite the setback of Antisoma, which is surprising to me, and it could be that we are on the cusp of another biotech boom ... but I would caution that Sareum has a number of very early stage products.'
Shares in British outsourcing firm Xchanging plummet 41 percent as it warns 2011 profit will be below current forecasts after a contract ended and U.S. performance dipped.
Seymour Pierce analyst Caroline de La Soujeole changes her rating to 'hold' from 'buy' in anticipation of a sharp downgrade to forecasts.
'This profit warning reflects a number of issues, namely: absence of contract settlements and consulting income, a contract termination, a deterioration of performance in the US claims business, higher investment cost in the Americas and margin pressures in the financial services business,' says the broker.
The FTSE Small Cap index is 0.3 percent lower in opening deals, underperforming a 0.1 percent fall on the FTSE 100 and the FTSE 250 .
British outsourcing firm Xchanging slumps more than 40 percent after saying 2011 profit would be below current forecasts after a contract ended and U.S. performance dipped and it would look for a new chief executive as David Andrews is to step down.
This prompts Seymour pierce and Canaccord to cut their ratings on Xchanging to 'hold' from 'buy'.
Psion Plc gains 5.2 percent after Evolution Securities initiates its coverage on the British provider of mobile computing services with a 'buy' rating and 150 pence target price.
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