VASTox’s technique of experimenting on small tropical fish has attracted five of the top ten global pharmaceutical companies as clients – and the Oxford-based company even has its own pipeline of drug candidates to boot.

Its process to test chemical compounds on the embryos of zebrafish has proved more accurate than test tube analysis and is luring ‘Big Pharma’ clients with its potential to save millions and reduce the need for ‘higher animal’ testing. VASTox tied up this market in March with the £15m all-share purchase of its only real competitor, Daniolabs, a deal adding complementary technologies, clients such as Pfizer and AstraZeneca, and further products to the pipeline.

The group has also built a leading position in the carbohydrate chemistry market (synthetic creation of compounds) with the £1.5m acquisition of profitable Dextra, whose capabilities in high-quality compound manufacture complements earlier acquisition MNL’s compound library and expertise in drug discovery.

On top of these services, points out chief executive Stephen Lee, VASTox has at least six drug discovery programmes and a long pipeline of potential drugs, including four pre-clinical candidates and two undergoing Phase I trials. An experienced biotech entrepreneur and former director of IP2IPO, Lee maintains VASTox offers a different proposition from its peers by looking to license out drug candidates well ahead of cash-churning late-stage trials.

Though losses tripled to £3m in the year to January, sales doubled to £1m and Lee remains bullish about prospects, mentioning three agreements with drug discovery companies worth over £800,000 already in the new year plus a potentially lucrative 5% royalty fee on potential product sales.

House broker Evolution has a 165p target for the shares, suggesting they offer good mid-term upside. However, while Vastox has good management and a good pipeline of prospects, it is still an early-stage business with a hefty market value. One for high-risk fans only. Everyone else should steer clear.