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Forging ahead

Pharma company shares continue to do well, outperforming other stocks as the FTSE 100 loses ground after hitting a four-year high

anvilThe stock market suffered a sharp sell off, with the FTSE 100 index falling through the 5,300 level, racking up a loss of more than 4 per cent since hitting a four-year high on October 3.

Investors' mounting fears about rising inflation and higher-than-expected US interest rates, as well as an increase in risk aversion, are major factors sparking the slide in world stock markets, most notably in Europe and Asia.

Increasingly, equity strategists think there is growing evidence that investors in UK equities are starting to shift out of more volatile sectors, such as mining, into more stable sectors, such as pharmaceuticals.

Share prices of the big pharma groups have generally fallen from their recent fresh highs at a slower pace than the overall market. Yet, a press report that the Office of Fair Trading could investigate the high prices of certain drugs did exert downward pressure on the shares at the start of this week.

AstraZeneca, however, came under heavy selling pressure on Tuesday morning after announcing it had received notice that Indian drugs group, Ranbaxy Pharmaceuticals, has applied to produce a generic version of Nexium.

The Anglo-Swedish company, which has 45 days within which to begin a patent infringement lawsuit against Ranbaxy, said it was evaluating the Indian firm's notice and has full confidence in the patents protecting Nexium.

Added sparkle
GlaxoSmithKline, in particular, has held up well. Dresdner Kleinwort

Wasserstein's decision to move this stock from a "hold" to "add" and raise its price target to £15.50 helped underpin the shares.

Shire Pharmaceuticals was also doing relatively well after submitting a Citizen's Petition on Adderall XR, its treatment for attention deficit hyperactivity disorder, to the US regulatory authorities.

This move is viewed by some analysts as a mechanism to delay approval of generic competition to Adderall XR or to push rivals into infringing its patent.

Antisoma brought a little much-needed sparkle to the biotech sector with its share price moving ahead smartly after disclosing encouraging clinical data for its lung cancer treatment, AS1404.

Chief executive, Glyn Edwards said the drug had the potential to become a billion dollar seller. He added that he hoped the drug would be in phase III clinical trials before the end of 2006.

In the meantime, Antisoma is preparing the ground for a listing on Nasdaq which is expected to raise fresh funds to finance its drug development programme.

Positive results from ongoing phase II trials of Trinam, Ark Therapeutics' novel gene therapy to prevent blood vessels blocking in kidney dialysis patients who have undergone vascular access graft surgery, were well received by the market. Data show that access grafts continue to remain functional three times longer than other procedures.

Falling star
Shares in SkyePharma continued to fall down to earth with the drug

development group's share price losing nearly 40 per cent since the beginning of September.

News that Fidelity Investments, its biggest shareholder, had sold part of its holding after the recent announcement of its heavily discounted rights offer badly damaged its share price.

It was the worst performing FTSE 250 stock last week, down more than 10 per cent.

Shares in biopharmaceutical company Evolutec, which develops small protein therapeutics for allergy inflammation and auto-immune diseases, also fell sharply.

It lost around a tenth of its value after announcing an underwritten £10m fund-raising placing. Most of the fresh funds are earmarked to develop rEV131, its lead molecule in treating hayfever.

Newcomers
On the new listing front there was good news. Synexus Clinical Research, a company that organises clinical trials for the pharmaceutical sector, is looking to float on AIM next month after raising fresh capital through a placing.

Meanwhile, Genosis, which specialises in consumer products for reproductive health, is also heading for flotation on AIM, probably towards the end of this year. Genosis said it plans to raise £8m.

2nd September 2008

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