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Ill wind

Stocks in the sector's leading companies soften as the US Vioxx settlement casts a cloud over the industry

WindmillLeading pharma stocks had been performing well before the spectre of lawsuits returned to haunt the sector in the wake of Friday's decision by a US jury to award damages against Merck. News of the $253m pay out sent a number of pharma stocks tumbling.

Meanwhile, the stock market remains fairly steady despite the lighter trading volumes because of the summer holidays many of the market participants are enjoying. The FTSE 100 Index was continuing its easier bias after testing the 5,300 level on Tuesday morning even though oil prices were down a little from last week's record highs.

After basking in the warm glow of being one of the top-performing FTSE 100 shares last week, GlaxoSmithKline (GSK) led the downward spiral after the market was further rattled when figures from a survey by Oslo University revealed that its top-selling antidepressant, Seroxat (paroxetine) was associated with increased suicidal tendancies in adults.

However, the UK company pointed out that the study "in no way reflects the picture that has been built up about the benefits and risks of paroxetine in adults.

AstraZeneca was also notably softer in line with investors raising the risk profile of the big pharma stocks following Merck's setback.

Setbacks for Shire

Shire Pharmaceuticals has also been affected by the gloom descending on the sector following press reports that its chief executive Matthew Emmens is under investigation by the Finanical Services Authority after buying shares in Barr Pharmaceuticals just days before it enter talks with the firm.

This comes as a blow to Shire, which hit yet another new high for the year towards the end of last week on talk of a settlement in the patent dispute with Barr, a US drugs group that wants to make its own version of Adderall XR, Shire's hyperactivity drug.

Acambis refutes patent breach

Acambis, the vaccine maker and biotechnology group, stood out when it came under some heavy selling pressure as Bavarian Nordic, a rival smallpox vaccine developer, had filed two claims against it alleging patent infringement. Acambis believes "the claims are without foundation" and said it "will be vigorously defending its legal position.

Despite the claims, Acambis recovered much of the ground lost because of the latest legal developments in early trading on Tuesday after it announced the successful completion of the trial of ChimerVax-JE, its investigational vaccine against Japanese encephalitis. Phase III trials of the drug are expected to be underway before the end of the year.

Rays of hope

Drug developer Antisoma moved higher on news that its aptamer drug, AS1411, a treatment for renal cancer, was given Orphan Drug Designation by the US regulatory authorities. This gives Antisoma a seven-year period of market exclusivity if AS1411 gains marketing approval.

A phase I trial last year showed promising signs of activity in treating renal cancer. Antisoma expects to reopen this trial shortly.

Shares in Innovata, a product development company focused on respiratory disease and inhaled therapies, touched a new high for this year on the back of positive product news.

The company announced that its Japanese partner, Otsuka Pharmaceutical is launching its bronchodilator drug Meptin, already a successful drug, in the Clickhaler as a dry powder inhaler in Japan.

The launch of this product is the result of a three-year collaboration between the two companies. Further product approvals and launches are on the cards for later this year.

Cyprotex, the drug discovery technology and information group, revealed a sharp reduction in its losses thanks to greater-than-expected turnover when it posted its interim results. It also revealed that it had secured its first customer in the Japanese market and an important new long-term contract with Sepracor, a US pharmaceutical group.

While the company said it is now trading cash flow positive, on a single monthly basis and despite claims that it has made significant progress towards achieving some major goals set at the beginning of this year, shares in the company dipped lower.

Elsewhere, biotech firm Vernalis was little changed after announcing that V003, a proprietary intranasal opiate analgesic, has started Phase II clinical testing.

2nd September 2008

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