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High Rise

The stock market, having broken through 5,700 as measured by the FT-SE 100 Index, has hit its highest level since July 2001

The stock market, having broken through 5,700 as measured by the FT-SE 100 Index, has hit its highest level since July 2001. The market looks set fair to crack the key 6,000 level during 2006 on the back of a record level of bids allied with hopes of interest rate cuts. It still has some way to go to beat its all time high of 6,030 reached on the last trading day of 1999 - but the lesson of history is that it will get there in the end.

The pharma sector outpaced the overall market as giants such as AstraZeneca (AZ) announced further deals - after the already high number of deals clinched in 2005. Rising research costs and generic copycat drug challenges to patents mean that the big pharmas are increasingly turning to small partners to bolster their drug pipelines. The cost of developing a drug from laboratory to patient runs at some £460 million on average and only one in ten trial drugs are successful, hence the pressure to buy expertise.

AZ - patent protection prospects boosted by Pfizer victory
AZ's share price soared by 118 pence after the news that Pfizer's globally dominant cholesterol drug Lipitor will not be hit by generic competition until 2011. A US court in Delaware ruled that a version of Lipitor from Ranbaxy Labaratories of India would infringe Pfizer's patents.

AZ is heavily involved in developing cholesterol products. The ruling over Lipitor is the second big patent win by big pharma companies over the last 12 months. Last April, Eli Lilly won against a challenge to its schizophrenia drug Zyprexa. The market reckons the ruling will boost AZ, which also faces patent challenges to its Nexium ulcer drug and Seroquel to treat patients suffering from bipolar disorder.

AZ seeks US green light to widen use of Seroquel
Patent protection has become a key issue as AZ is seeking US agreement to widen the use of Seroquel by means of a supplementary application to the US Food and Drug Administration (FDA). The drug has annual sales of £1.2 billion. There are 13 million patients globally suffering from both schizophrenia and bipolar disorder linked to manic behaviour in depression. AZ may get the green light from the US Food & Drugs Administration to widen the patient base for Seroquel by the end of 2006. If AZ is successful, Seroquel will be established as the sole drug that can be used to treat both the manic and depressive episodes associated with bipolar disorder. AZ has filed for the enlarged remit as a result of clinical trials showing that depressive symptoms went into remission for over 50 per cent of patients treated with Seroquel.

And AZ clinches a collaborative deal with Targacept
AZ also announced an agreement with Targacept of the US - which creates drugs aimed to treat disorders of the nervous system - to collaborate over a drug for Alzheimer's disease in patients also suffering from schizophrenia. The Targacept compound is TC-1734, which is in mid-stage phase II clinical trials. Targacept could receive a maximum of £170 million from AZ and will also get royalties. AZ had earlier clinched a deal with US AtheroGenics, a biotech specialist, over the rights to a heart drug, which is in phase III trials. AZ also announced it was buying the UK biotech company KuDOS for £120 million.

GSK - favourable phase III trial news on Rotarix for fatal diarrhoea
GlaxoSmithKline's (GSK) latest report - the results were published in the New England Journal of Medicine - on its oral vaccine Rotarix is that it is a safe and effective treatment to counteract rotavirus gastroenteritis, which can trigger off fatal diarrhoea in children. According to the latest testing in phase III trials, Rotarix protects 85 per cent of patients suffering from severe rotavirus and was totally effective in treating more severe rotavirus episodes. Rotarix could grow to blockbuster drug status as GSK forecasts a worldwide market of up to £1.3 billion in sales. GSK is seeking approval for the drug from European Union regulators in February. Rotarix is already licensed throughout Asia and Latin America. Rotarix could deliver sales of up to £1.3 billion by 2010.

GSK alert on diabetes drugs
GSK has warned the US drugs regulator of fresh eye complications associated with three diabetes drugs - Avandia, Avandamet and Avandaryl. Patients taking the drugs reported macular edema - a swelling of the eye. The three drugs produced £1.1 billion of sales in 2004. Diabetes can trigger blurred vision. It is thought that the three drugs increase the risk of side effects - such as eye swelling - only marginally.

Against a background that the Association of the British Pharmaceutical Industry (ABPI) has introduced a new code of advertising safety, GSK and Roche are facing legal action from rival pharmas Procter & Gamble and Sanofi-Aventis. The rival pharmas believe GSK and partner Roche's marketing over-rates the benefits of Boniva, a newly launched osteoporosis drug. One in three women over fifty suffer bone fractures from osteoporosis.

The rival pharmas sell Actonel, a competitive brittle bone drug and are seeking to block advertisements for Boniva which are alleged to be false and misleading. They allege that the advertisements imply Boniva would help prevent non-vertebral (non-spinal) fractures, when it only protects the spine - unlike their own product Actonel, which additionally reduces fractures in thigh, wrist and hip bones. GSK and Roche stand by the accuracy of their advertising.

GW Pharma to carry out Phase III trials on cannabis-based Sativex
GW Pharmaceuticals, which has just raised £8.6 million of fresh cash via a share placing, has won approval from the FDA to carry out a major study on Sativex, which is cannabis-based. Phase III trials for Sativex have been successfully carried out in Europe on 177 patients suffering pain from cancer who were not responding well to morphine and other strong painkillers. Sativex is used as a pain alleviator in cases of advanced cancer. GW starts phase III trials towards the end of 2006. If successful, a further application to US regulators will be made two or three years later. GW is looking for a licensing partner to bear the main costs of US development.

Phytopharm, the biotech company, saw a rise in its share price after announcing an exclusive global marketing and distribution deal with Schering-Plough Animal Health for Phytopica, a plant-based product which give dogs a healthy skin and coat.

Malcolm Craig is the author of 14 books covering aspects of investment ranging from shares to bonds and gilts to gold. He is one of the UK's most respected investment commentators.

2nd September 2008

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