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Christmas cheer

The stock market is in fine fettle in the run up to Christmas as speculation on big mergers fuels the bullish mood

The UK stock market has been driven ahead by rumours of mega bids, which are underpinning the usual seasonal bullish mood in the run up to Christmas. This could to lead to some early profit-taking in the New Year, when the stock market's all-time high of 6,930 - hit on the last dealing day of 1999 - will be tested.

In pharma, there is continued talk of more merger and acquisition activity. Hopes of a bid for Shire Pharmaceuticals have ignited yet again, driving the firm's share price up by 34p to 1,064p. If City speculation is to be believed, AstraZeneca is the favoured bidder, although US group New River Pharmaceuticals is another possible suitor. It already has a profit-sharing agreement with Shire for NRP 104, the next generation attention deficit hyperactivity disorder drug.

GSK snaps up a biotech
GlaxoSmithKline (GSK) has bought itself a useful £230m Christmas present in the shape of Domantis, a biotech company which is headquartered in the US but whose research is based in Cambridge, England.

The deal will enable Domantis, which has 10 potential domain antibody products in its pipeline, to develop the next generation of therapy, and adds 60 scientists to GSK's Biopharmaceuticals Center of Excellence for Drug Discovery.

Domantis effectively doubles GSK's antibody drug pipeline and gives the pharma giant a stake in the newest types of product, which may hold the key to the future as they could provide more effective and flexible treatments. Domantis has focused on domain antibodies, which some experts think will offer a number of advantages over injectable monoclonal antibodies.

The first human trials of Domantis' antibody drugs will start in the second half of 2007 and the first drugs could reach the market in 2012.

Peptech of Australia has a 31 per cent stake in Domantis and will receive £71m as part of the deal.

Diabetes trial gives shot in the arm to GSK
Data from ADOPT, the largest ever study on diabetes, gave GSK a boost when it revealed that patients starting their diabetes treatment on Avandia had an improved chance of maintaining blood sugar levels inside safe limits, versus older diabetes rivals.

The clinical trial lasted five years and posted positive results for patients who have taken Avandamet, which comprises Avandia and metformin, a generic drug. Avandamet and Avandia were responsible for approximately £1.2bn of GSK's revenues last year. Navid Malik, analyst at broker Collins Stewart, thinks sales of the drug could now hit £3.35bn by 2010.

ReNeuron puts up a fight
ReNeuron, the stem cell specialist based in Surrey, saw its share price rise to 24p on news that has filed for US Food and Drug Administration approval to begin clinical trials of its experimental treatment for chronic disability caused by stroke. Stem cells harvested from an aborted foetus are to be injected directly into patients' brains. This is the first time human patients involved in the clinical trials will receive the therapy.

Bicompatibles proves its worth
Biocompatibles' share price jumped on positive data from trials of its drug-eluting bead, aimed at primary liver cancer, which reduces the leakage of chemotherapy into a patient's body. No patients in the trial suffered unpleasant side effects, such as bone marrow problems or hair loss, from the treatment. Some 89 per cent of patients survived for two years following treatment, compared with 63 per cent on conventional chemotherapy.

Centre for UK drug development funding
Chancellor Gordon Brown announced in his pre-Budget report plans to establish a body to coordinate all public health research spending in the UK. He is also allowing new medicines on to the market earlier.

The news follows a report by Sir David Cooksey who was asked by the Chancellor to find ways of making R&D more efficient. A body to coordinate the UK's £1.35bn annual spending on R&D at universities and hospitals will be established, as well as a new funding board including representatives of the Medical Research Council, Department of Health, Department of Trade and Industry, as well as from the healthcare industry.

The new Office for Strategic Co-ordination of Health Research, headed by John Bell, president of the Academy of Medical Sciences, will oversee the Medical Research Council, which focuses on basic science, and the National Institute for Health Research, which runs research undertaken within the NHS.

The BioIndustry Association welcomed the Cooksey report for prioritising support for medicines and therapies that tackle unmet health needs, commented its CEO, Aisling Burnand. In particular, the recommendation for a new drug delivery pathway could have a dramatic impact by reducing the cost of drug development, she added.

Malcolm Craig is the author of 14 books on different aspects of successful investment; he is one of the country's most respected investment commentators

2nd September 2008

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