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Bouncing back

The UK stock market shrugged off the 7/7 terrorist attacks on London and threats of recession in Britain's manufacturing industry to move to successive, almost daily, new three-year highs

The UK stock market shrugged off the 7/7 terrorist attacks on London, plus threats of recession in Britain's manufacturing industry to move to successive, almost daily, new three-year highs.

The reason? Hopes of lower interest rates in early August, if not before. The FTSE 100 Index is 5,214 so there is still a long way to go until it equals the last all time peak of 6,930 reached on the last trading day of 1999. The market should continue to rise during the summer, underpinned by bids and rumours of bids.

Pharma companies were in the news as the US Food & Drug Administration (FDA) looked into their products, notably GSK's top-selling asthma drug Advair, and erectile dysfunction drugs produced by a number of pharma companies. However, worries were soon brushed away and pharma shares kept pace with the uplift in the market as a whole.

New biotechs on AIM

The biotech sector is coming to life again despite the difficult conditions facing biotech companies in raising fresh equity capital - an environment that led to Epitan being pulled out of a flotation on the Alternative Investment Market (AIM) and ProStrakan's float getting a lower than expected price.

British stem cell pioneer Reneuron, owned by Merlin Biosciences, is planning to make a stock market comeback by floating on AIM later in July with a possible price tag of £25m to £30m, in order to raise £10m. Reneuron claims the stem cell market could be worth $10bn by 2013; so far there are only a handful of stem cell companies in the market.

Reneuron has floated successfully on the stock market before, during the biotech boom, but was taken off the market in 2003 when the firm's diabetic neuropathy drug failed in trials. Chris Evans, the venture capitalist, took Reneuron private for £3.6m.

The company can produce billions of adult stem sells, and has just clinched a partnership deal with Stem Cells Inc, of the US. The deal should speed up new treatments for Huntingdon's disease, Parkinson's disease and for strokes. Company boss, Michael Hunt, is seeking to file for approval to start trials of a stem cell stroke treatment in 2006.

Another coming flotation is Israeli biotech D Pharm, which is due to join AIM on July 25 with a price tag of £15m. Chaired by former SmithKline Beecham boss Jan Leschly, D Pharm is a speciality pharmaceutical company which designs and develops new drugs.

Preliminary bid talks

Tepnel Life Sciences, which is an AIM stock, saw its penny share price of 6p hit 8.25p on news that Bio-Red Laboratories, of Hercules, California, has recently scooped up a 3.87 per cent share stake.

Punters, hoping for a bid to deliver a quick windfall gain, stampeded the market and gleefully saw the share price rise further after Tepnel Life Sciences revealed it was in preliminary takeover talks `with one or more parties which may lead to an offer'.

GSK's Advair cleared

GlaxoSmithKline's (GSK) share price managed a rise of 20p despite its top-selling asthma drug, Advair, causing concerns at the FDA over its safety, on the grounds that its active ingredient could be linked to a number of premature deaths. This followed extensive patient tests of the drug, which enjoys sales of £2.7bn annually.

However, a panel of experts pointed out that Advair's unique ability to control asthma symptoms offset the small possibility of it contributing to an asthma attack severe enough to be life threatening. It was also recommended that the products continue to publish full `black box' warnings of their potential side effects.

The FDA had placed Advair and another GSK product, Serevent, under scrutiny along with Foradil, made by Novartis. There was widespread relief after the FDA decided Advair was safe enough to stay on the market.

BTG's Varisolve gets trial thumbs up

Shares in BTG streaked up by nearly 30p, to 202p, as the FDA cleared its Varisolve varicose vein treatment for clinical trials. Varisolve involves injecting foam into a varicose vein in order to collapse it, and bring about a quick recovery.

Nearly two years ago the FDA stopped the Varisolve trials due to concerns over the risk of patients developing deep vein thrombosis, or bubbles in the bloodstream. It is thought that BTG will take this opportunity to clinch a deal with a major league pharma group to take Varisolve through the rest of the trials and launch it on to the market.

ED vision loss link

A number of erectile dysfunction drugs, including Levitra, which is made by GlaxoSmithKline, could result in a loss of vision, according to US regulators, which have drawn attention to incidents of vision loss among patients taking GSK's Levitra, Pfizer's Viagra and Lilly's Cialis.

However, the FDA is still unsure as to whether the drugs are directly to blame, or if the loss of vision has been caused by diabetes or high blood pressure.

Acambis ends talks

Acambis' share price rose 5 per cent on reports that the smallpox vaccine specialist was bidding for the vaccines business - reckoned to be worth £200m - of US firm, Baxter.

Acambis confirmed that discussions about the acquisition of a `significant vaccines business' had taken place but were not being continued - but wouldn't confirm that the business was that of Baxter.

The Author
Malcolm Craig has authored 14 books on varying aspects of investment and is one of the UK's leading stock market commentators.

2nd September 2008

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