Smaller Companies: Gene genius from Amersham

Scientists across the world are united in a major effort to map out the complete sequence of human genes: the Human Genome Project. The numbers are awesome - 100 million genes, 3 billion pairs of DNA. Completion of this vast task is now expected before the end of the decade with major implications for medical science.

Amersham International, the Tories' first privatisation, has the skills to reap real benefits from the project. The last few years have been a roller coaster ride for group. Spun off originally from the Atomic Energy Authority, it prospered after the 1982 flotation, boosted by its core life sciences division - which supplies radioactive materials for public and private sector laboratories. Later in the decade, however, the boffins lost their way with an expensive effort to develop blood testing kits.

Bill Castell was then drafted in from Wellcome, as group chief executive, to inject some commercial vigour. After disappointing profits growth, the shares have marked time since 1993. The last two sets of half time figures, however, have come in ahead, fuelling renewed hope for the shares.

Amersham's core expertise still revolves around radioactivity. But the star now, which barely existed in the early 1980s, is branded healthcare products. In the latest six months to 30 September, divisional profits grew 139 per cent to pounds 14.1m - half of total operating profits of pounds 28.7m. A com- bination of acquisitions and new licence approvals have made Amersham the world leader in nuclear medicine, with roughly a third of the market.

One of its products, Metastron, is used for the relief of pain caused by secondary bone cancers. But faster growth is being achieved by diagnostic products, in particular Myoview, which enables doctors to monitor heart disease without surgery. In two years Myoview has taken a large chunk of the European and Japanese markets and is showing signs of doing equally well in the $120m a year US market after approval last April.

A notable coup has been a deal with Sumitomo to merge the Japanese giant's nuclear medicine business with Amersham's much smaller operation there. For pounds 106m the group has a 50 per cent stake in Nihon Medi-Physics (NMP), increasing its share of the Japanese nuclear medicine market tenfold to 67 per cent.

Ultimately the hope is that NMP will use Amersham's global network to gain worldwide distribution for its products.

Looking vigorous, too, is life sciences. Amersham has been improving the non-radioactive side of the business, based on luminescent products, and targeting drugs companies rather than public sector bodies.

At the same time it has been increasing its capabilities in genetic studies. This September, Amersham and bigger rivals Roche and Perkins Elmer swept aside complex arguments about patent protection and gave each other free access to all markets with royalties payable when one of the three is selling the other's product. The effect is to quadruple, to $240m, the market which Amersham can address with its new gene-sequencing products.

Last but not least are promising drugs in the pipeline, including agents to diagnose Parkinson's disease, Alzheimer's and cancer. One analyst is looking for profits to grow from pounds 50.8m to pounds 66.5m this year, followed by pounds 78.5m. With the shares now priced at 1,091p, that would leave the rating in the mid teens. Good value for a company with developments poised to capture the imagination.