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British Bulldog

The UK stock market had chalked up yet another three-year high following London's spectacular 2012 Olympic victory - and was then brought to its knees with the biggest daily fall since 9/11

The UK stock market had chalked up yet another three-year high following London's spectacular 2012 Olympic victory - and was then brought to its knees with the biggest daily fall since 9/11 - by the terrorist attacks on London on 7 July.

However, the bulldog spirit re-asserted itself and the market recovered to record another three-year high of 5242, backed up by a calm Wall Street. The Bank of England kept interest rates on hold at 4.75 per cent for the 11th month in a row, but is under pressure to slash interest rates on August 3 - if not sooner - to boost High Street consumer spending.

The pharma sector was, in the words of the young curate to his Bishop's wife, who had asked him as to the state of his breakfast egg, `good in parts', with some pharma and biotech companies chalking up gains on good news as to major drugs and vaccines coming through the pipelines, along with opportunistic bids.

The UK biotech sector, after its recent lacklustre performance is still attracting interest from foreign drug companies seeking a London listing.

Early promise for AZ's Zactima
AstraZeneca's (AZ) shares rose on news that it is to start recruiting patients for the late-stage tests of an experimental lung cancer treatment, Zactima, which is showing early promise. The market hopes Zactima will make up for some of the lost income from Iressa, which AZ was poised to launch but which did not make it through the final stages of development.

AZ is also developing, in conjunction with the US Avanir Pharmaceuticals, a new type of cholesterol-lowering pill. Avanir is to receive an upfront payment of £5.6m. If the product successfully passes some development checks and hits specified sales targets Avanir could make up to £188m from the new drug.

Another pharma group in the FTSE 100 index, Shire Pharmaceuticals, also moved smartly higher thanks to the weak pound and a stockbroker's upgrade. UBS lifted its target price for Shire to 745p from 625p and raised their rating for the share to buy from neutral.

Vernalis buys rival Ionix
Vernalis, the biotech group formed from British Biotech, Vernalis and Ribotargets, has scooped up rival Ionix for £12.5m payable in shares - both companies have former Celltech boss Peter Fellner as chairman. This will give Ionix shareholders a 9 per cent stake in Vernalis' enlarged equity capital.

Ionix' jewel in its crown is IX 1003, a proprietary intranasal formulation of buprenorphine for acute post-operative pain. If IX 1003 gains market authorisation, the former Ionix shareholders will get a cash payment of £5m.

Merck hopes for early victory over Vioxx
Merck has started legal action to fend off billions of dollars in potential payments for its liability over Vioxx, its pain drug which it pulled out of the market last year due to increased heart risks. Merck had withdrawn Vioxx, a COX-2 inhibitor, after a company study discovered it doubled the risk of heart attacks and strokes after 18 months. Experts calculate that the Merck liability could be from well under $5bn to $10bn, or even more.

From Merck's viewpoint, an early trial victory could reduce potential liabilities. The case against Merck has been brought by the family of Robert Ernst, who had been taking Vioxx for six months when he died in May 2001, aged 59, of complications from heart arrhythmia. His family blames Vioxx for the death and is seeking unspecified damages from Merck.

Roche-GE link up on Alzheimer's disease
Roche and GE Healthcare have announced a link up - the first of its kind - to assist in the diagnosis and treatment of Alzheimer's disease. There are 18m Alzheimer sufferers globally and the disease has no known cure. They are to collaborate over an attempt to identify and limit the levels of beta-amyloid protein, which forms a type of brain plaque associated with memory loss in Alzheimer's disease victims.

Roche has six Alzheimer's disease drugs in its early stage pipeline. GE Healthcare will provide a specially made diagnostic imaging agent with its positron emission tomography (PET) system to test Roche's Alzheimer's drugs. The aim of the Roche/GE Healthcare link up underlines the increasing focus on personalised medicine - pharma groups are endeavouring to gain a better knowledge of a disease so that patients who are likely to respond well can be targeted quickly.

Drug development star
Drug development company Alizyme was the star in the sector when its share price soared by more than a quarter in value after slumping to a 22-month low. An announcement from the company stating that it did not know the reason for the recent tumble to a low of 75p in its share price kick started the explosive rise.

The share has been on a steep slide since April when the company announced a £33m fund raising exercise to continue financing the clinical trials of its four most promising main drugs.

The company raised the finance even though the shares fell to below the rights offer price of 100p per share because the offer was underwritten. Its four main drugs under development are Renzapride, a treatment for irritable bowel syndrome, ATL 962, an obesity drug, Colal-Pred, a treatment for ulcerative colitis, and ATL, a mucositis treatment.

An announcement that Alizyme had reached agreement with the US drug regulators to begin a phase III clinical trial for Renzapride sent the shares sharply higher, before investors indulged in a bout of profit taking.

The results of the trial are expected to be divulged in the first half of 2007.

Report by Malcolm Craig and Brian Zlotnick.

2nd September 2008

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