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Pharma stocks battle on

The stock market continues to struggle on with the FTSE 100 yo-yoing around the 4,900 mark but lack of investment buying interest has taken its toll on the leading pharma giants.

Our weekly review of the pharmaceutical stock market

The stock market continues to struggle on as it tries to make headway in the face of oil prices hitting record highs. Investors are concerned that high energy and commodity prices will push inflation up and hurt corporate profitability. Not surprisingly the FTSE 100, is yo-yoing around the 4,900 mark, while the market digests the latest oil price spike and fears of higher global interest rates.

Both GlaxoSmithKline (GSK) and AstraZeneca have been out of favour recently. Weakness in both these leading stocks has mainly been responsible for pulling down the pharmaceutical and biotech sector, which has been one of the worst performing sectors recently.

Indeed, GSK briefly fell through the £12 mark to almost touch its low for this year.There were no specific developments, apart from a general lack of investor buying interest that caused these heavyweight stocks to lose significant ground.

Reports of a US study that indicated Pfizer's Viagra could cause blindness in a few rare cases might have caused a little softness in the share price of GSK - which has competitor drug Levitra.

Meanwhile, Shire Pharmaceuticals sparkled, gaining nearly 8 per cent to pierce the 600p level, after its chief executive's presentation to a US healthcare conference was warmly received. Matthew Emmens said at the Lehman Brothers Annual Global Healthcare in Florida that Fosrenol, a kidney drug, had captured 15 per cent of new US prescriptions after being only nine weeks on the market.

He pointed out that the suspension by Canada in February of Adderall XR, Shire's hyperactivity drug, has not significantly impacted on its sales of the drug in the US. He also alluded to the relatively big number of late-stage drugs the group expects to file over the next few years as well as the $1.5 billion cash mountain that can be used for licensing deals.

Elan, the Irish drugs group, however, saw its share price more than halve. This followed the news that a third patient taking Tysabri, its multiple sclerosis drug, had developed a rare neurological disease. Tysabri, developed with Elan's US partner Biogen Idec and launched last December, was withdrawn on February 28 after two patients contracted progressive multifocal leukoencephalopathy.

Investors' hopes of a return to profitability by Elan were based on expectations that Tysabri would be a blockbuster. The latest development in the saga has resulted in the shares losing around 90 per cent of their value since Tysabri's withdrawal.

Now some analysts are concerned that Elan could face serious problems in repaying more than $1 billion of debt due in December 2008 without resorting to major financial restructuring.

Shares in Proteome Sciences shone after the company, which uses proteins to develop tests for diseases, announced a licensing deal with an unnamed major global healthcare group. The 25 per cent jump in its share price comes after a bout of severe weakness when the market grew tired of waiting for it to conclude its promised deals.

Proteome also announced that it had completed a fund raising exercise, where it raised £4.7 million through a placing of shares with an unnamed institution. The fresh funds should ensure it has enough money to finance its activities for more than another year.

Elsewhere, Ark Therapeutics enjoyed a good gain after signing a licensing deal, said to be worth up to £35 million, with German drugs firm Boehringer Ingelheim for rights regarding its cardiovascular therapy. Antisoma, however, was a touch softer despite the biotechnology group's plans to list its shares on the Nasdaq market to make it easier to tap US markets for new funds.

Meanwhile, Proximagen, a drug developer, made a good debut on AIM with its shares up 6p on the 148p offer price.

2nd September 2008

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