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Malcolm's Market Eye: 3 to 9 November 2007

Sterling streaked up to its highest level against the US dollar for 26 years, testing GBP 1 to USD 2.08. Foreign exchange experts reckon sterling could hit GBP 1 to USD 2.10 or even higher.

Sterling streaked up to its highest level against the US dollar for 26 years, testing GBP 1 to USD 2.08. Foreign exchange experts reckon sterling could hit GBP 1 to USD 2.10 or even higher.

The strength of sterling is not expected to last very long into 2008, and a fall back will give some help to beleaguered exporters and to pharmaceutical companies with large USD revenue flows. The Federal Reserve tried to kick start an economic recovery in the US with a quarter point rate cut to 4.5 per cent.

The US residential housing market has continued to slump. The S&P/ Shiller house price index demonstrated that prices in 20 US metropolitan areas fell 3.3 per cent in the 12 months to August 2007. This is the worst reading since the series began in 2001 and the eighth consecutive monthly fall.

In the UK the early signs of a house price fall are beginning to show through as new mortgages granted shrink away to the lowest level for two years.

Global stockmarkets continued to fall after worries about the poor state of the US economy and Citigroup's shock news of additional losses on UK sub-prime mortgages of GBP 5.3bn. In the UK, bank shares were hit hardest on worries that losses on sub-prime mortgages in the UK could have been hidden away off balance sheet.

The trouble is that these risky mortgages are included in packages of mortgages which are bought and sold by banks, and nobody knows which packages are contaminated with dodgy mortgages unlikely to be paid.

The FTSE 100 Index, that universally quoted barometer of the stockmarketís fortunes ended at 6,461, its lowest level for six weeks.

The pharmaceutical sector continued to offer its defensive attractions to private and professional punters alike on the basis that illness, like taxes, will be always with us. The pharma sector was pulled in the wake of the main market, both up and down, but with a cushion in the share price reflecting its defensive attractions. The weak USD, however, continued to put a question mark over pharmaceutical companies with extensive US exposure and USD revenue streams.

Shire reports 35 per cent rise in revenues
UK-based Shire Pharmaceuticals announced a 41 per cent rise in product sales to USD 543m in the three months to 30 September and a 35 per cent rise in total revenues to USD 609m.

Shire is focusing on buying up smaller competitors as it moves into more specialist medical sectors. The company also heartened the stockmarket by increasing its projections for revenue growth during 2007 to over 30 per cent from 25 per cent.

Leading sellers includes Fosrenol, for kidney dialysis sufferers, and Elaprase for Hunter Syndrome, a rare genetic condition.

Vyvanse captures four per cent of US market
Vyvanse, Shire's drug for hyperactivity, has increased its share of the market in the US, having launched in the summer of 2006 to replace Adderall XR, its other drug to treat attention deficit hyperactivity disorder, which will lose its patents in 2009.

In the months July to October Vyvanse captured four per cent of the US market, giving Shire an overall market share of 30 per cent.

ReGen rises on miracle working sleeping pill
ReGen Therapeutics benefited from the television publicity given to its sleeping pill Zolpidem which was thought to have prompted a return to wakefulness in a patient suffering from a prolonged coma and which featured in the BBC1 documentary ëONE life ñ the waking pillí. This penny share rose GBP 0.15 to reach GBP 0.78

Stakebuilding at Entelos
Pfizer bought a further 2.5m shares in US life sciences company Entelos, taking its stake to 6.9 per cent or 5.2m shares in the company.

Cryo-Save for AIM
Dutch company Cryo-Save, which collects babiesí stem cells and stores them to use in future medical treatment, has arrived on the Alternative Investment Market (AIM) to raise funds to help it find future partners.

The Dutch company is the largest private umbilical cord blood stem cell bank in Europe with over 50,000 samples stored. It is raising GBP 28m in the flotation and will spend most of this on buying distribution partners in Greece, Spain and Hungary.
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Plethora announces start of trials for its premature ejaculation treatment
Plethora Solutions saw its share price rise as it commenced phase III trials for its PSD502 for premature ejaculation.

Medical moving into profitability as it changes tack and clinches big deal
Medical House, maker of healthcare equipment and services, announced a loss of GBP 1.3m on sales of GBP 5.1m for the year to end June 2007. This compares with a loss of GBP 1.6m on sales of GBP 5.6m in the previous year.

Medicalís jewel in its crown is its drug delivery business, which saw turnover streak up from GBP 645,000 to GBP 1.7m and an operating loss of GBP 308,000 in the previous year turn into a profit of GBP 503,000 in its latest year to end June 2007.

The orthopaedic equipment side of Medicalís business generates much bigger sales and revenue but turned a profit of GBP 52,000 in FY06 into a GBP 856,000 loss.

Medical has now clinched a big deal for its ASI safety needle injector system which should bring in revenues of at least GBP12m over the next five years.

Management is changing the business model for the orthopaedic business. Medical has been making orthopaedic tools to order on a sub-contract basis but has moved to making its own manufacture patented tools.

Redmayne Bentley, the broker, forecasts profits of GBP 500,000 for FY08 on sales of GBP 8m, followed by sales of GBP 11m and profits of GBP 2m when the ASI contract pays out after its launch.

Malcolm Craig, a freelance financial journalist and author, is one of the UK's most respected financial commentators.

9th November 2007

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