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Malcolm's Market Eye, June 26, 2007

The UK stockmarket took a tumble after Bank of England governor, Mervyn King, forecast a financial melt down as the lax credit boom continues. He singled out the banks for foolhardy lending to private equity specialists to finance mega deals and hedge funds that accommodate massive risk exposure to a market collapse.

The UK stockmarket took a tumble after Bank of England governor, Mervyn King, forecast a financial melt down as the lax credit boom continues. He singled out the banks for foolhardy lending to private equity specialists to finance mega deals and hedge funds that accommodate massive risk exposure to a market collapse.

The market has continued to retreat since the bloodbath on June 21, shedding further points to hit 6,567 as measured by FTSE 100 Index, although there is evidence of a muted recovery to 6,588 as the UK market tracks a recovery on Wall Street.

We are likely to see a further one-quarter of 1 per cent hike in UK interest rates to 5.75 per cent in July and the continued erosion of the love affair between Britons and their credit cards. Big supermarkets like Sainsburyís are already warning of customers tightening their belts on the spending front ñ along with zipping up their purses.

The marketís reluctance to accept any unexpected changes showed up as Phytopharmís share price dropped GBP5.5p to 53p in reaction to the appointment of Alistair Taylor as non-executive chairman, to replace Dr Paul Whitney. Currently, the pharma sector is seen as defensive towards investors thanks to the existing market turmoil. Even GlaxoSmithKline (GSK), which is still suffering from claims that Avandia, its diabetes drug, is linked to an increased risk of heart attacks in patients taking the drug ñ is seeing some bottom fishing buying by speculators, which has lifted the share price off its low point for the year to GBP12.98

Money in the coffers at Minister

Minster Pharmaceuticals announced a pre-tax loss of GBP2.74m for the year to March 31, 2007 as against a loss of GBP1.81m for the previous year and broker Nomura does not expect to see any revenues flowing in until 2011. With GBP16.4m in its coffers, Minster has the ability to carry out the important phase II trial on its drug, Tonabersat, for treatment of migraine. Minsterís cash burn was GBP3m last year and should double in 2007.
Tonabersat is a new type of drug known as a gap junction blocker. Its main competitor on the market is a treatment for epilepsy, Topamax, made by Johnson & Johnson, which also used for the treatment of migraine, and yields yearly sales of over USD1bn.

Tonabersat is to be tested on no less than 500 patients, with the trials starting in three months time in Canada and the US, with results expected by November 2008. By 2009, Minster plans to file Tonabersat with US regulators, possibly with a partner.

Another potential winner in the Minster stable is Sabcomeline, a drug for schizophrenia and associated cognitive decline. There is a possibility that combining Sabcomeline with existing schizophrenia drugs may slow down the psychotic consequences of schizophrenia.

 

GW Pharma gets green light for Sativex
GW Pharma has been given a Qualifying Notice in Canada to launch its leading drug, Sativex. The company already has approval for Sativex for the treatment of multiple sclerosis and full approval in Canada now looks a foregone conclusion. Such a move would provide GW with a potential foothold in the US, where the firm has signed a deal with Otsuka, which could see the Japanese firm bear all the costs of the US development activities for Sativex, plus financial support for a range of additional R&D.

GW Pharma is also concentrating on getting Sativex approved in Europe to treat multiple sclerosis and success on this front would strengthen the firmís share price as it would be seen as a major advance. With GBP26m in front end fees and USD376m of prospective milestone payments the future for Sativex looks rosy.

Revlimid gets EMEA go-ahead
The European Medicines Agency (EMEA) has given the green light to Revlimid, which is said to double the survival rate of patients with myeloma. EMEA marketing approval for Revlimid is for use with standard combination therapy, dexamethasone, in patients who have received at least one earlier treatment.

Goldshield agrees deal with NHS
Goldshield, the pharmaceutical group, spurted ahead by nearly GB31p to GB218p on news that it has agreed a GBP4m deal with the Department of Health over alleged price fixing of medicines, without admitting any liability.

 

Malcolm Craig is a freelance financial journalist and author of 14 books on successful investment.

27th June 2007

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