Investment: Yoghurt may fatten Scotia

SCOTIA HOLDINGS' star product is a yoghurt ingredient called Olibra, which helps slimming by making people feel full after just a spoonful. Shame that the biotechnology group cannot apply the technology to shareholders' wallets, which must be feeling pretty empty at the moment.

Shares in Scotia have lost almost 80 per cent of their value in the past 12 months as boardroom battles and strategic mistakes left investors with little appetite for the stock. The management, led by recently-appointed chief executive Robert Dow, swear that the troubles are in the past.

Scotia sounded a bullish note at yesterday's interim results, which showed a fall in the pre-tax loss to pounds 11m from pounds 12.8m. Mr Dow said the company is to launch its star anti-cancer drug Foscan within the next two years. It's a revolutionary treatment which isolates cancer cells so that they can be killed by a laser and could generate sales of up to pounds 250m by 2005.

However, it has never been used before to cure cancer and sceptics point out that it will take a long time to convince surgeons to use it ahead of more conventional treatments.

Apart from Foscan, Scotia's drug pipeline looks rather empty, placing a huge burden on the development of Olibra. The product is already in the UK and Sweden, and Scotia is negotiating with major food companies to license it in the rest of Europe and the US.

Here, too, earnings prospects look very uncertain. Optimists talk of annual revenues of pounds 60m within four years, but that assumes a dramatic jump in sales in the world's top 10 food markets. The shares rose 6.5p to 96.5p yesterday, spurred by the results and by Scotia's strong cash position, which should pay for three years of development. But given the long-term doubts over the success of Scotia's medical and nutritional products, they are no more than a hold.