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Phoenix rising

Shares in Elan have bounced back once more regaining some lost ground on news that Tysabri may overcome its recent brain disease fears

PhoenixThe UK stock market roared ahead to its highest level since December 2001, fuelled by the rising price of oil stocks and buttressed by a big interest in mining stocks, a small cut in UK interest rates and news of bids, both actual and prospective.

Since posting the market's latest peak, profit-taking has developed but the outlook remains sound and the bull run should continue. UBS has raised its 12-month target for the FTSE 100 Index, the most widely used barometer of the stock market, from 5,400 to 5,600.

The pharma sector also fuelled the stock market's rise by recording above average gains as a string of positive news items emerged from pharma companies such as Elan, which is rising like a phoenix from the ashes following an earlier 90 per cent plunge in share price, and GlaxoSmithKline (GSK), which has secured a deal with the German government.

Glimmer of hope
Elan, the Irish pharmaceutical group, saw its shares bounce back rising from 6.1p to 7.4p on the news that its multiple sclerosis treatment, Tysabri, may be more promising than first thought.

The company is working with US partner Biogen on Tysabri, a human monoclonal antibody, and hopes that a current evaluation of the drug for treating Crohn's disease and rheumatoid arthritis will be completed by the end of the year.

A fresh safety study of Tysabri found no new confirmed cases of progressive multifocal leukoencephalopathy (PML), a rare and potentially fatal brain disease, which lead to the drug being pulled from the market in March this year and the 90 per cent fall in share price.

There is some hope that Tysabri will return to the market inside the next few months; however, there are some in the City who reckon it will make only a restricted comeback. At the start of the year, analysts had tipped the product to reach peak annual sales of between $2bn and $3bn by 2007.

Provalis' shares edged up from 6.62p to 6.75p on news that its chief executive, Phil Gould, has resigned. Non-executive director Peter Woodford, who joined the board in July, is to become interim chief executive.

GSK clinches German contract
Ahead of a possible global flu epidemic, GSK has clinched a deal with the German government to supply 1.7m treatments of its influenza drug, Relenza.

Rated as second in the market to Roche's Tamiflu, Relenza costs £25 per dose and was initially turned down by the National Institute for Health and Clinical Excellence (NICE) as being too costly to be dispensed in the UK.

Biota Holdings, a small Australian biotechnology company, helped develop Relenza and gets a 7 per cent sales royalty. Biota is in an ongoing dispute with GSK, accusing it of having so far `missed the boat' by failing to promote the product adequately.

Blue-blooded broker, Cazenove, gave GSK's shares a boost following better-than-expected half-year results and upgraded its five-year earnings per share forecasts.

The broker pointed out that in the year to date almost 70 per cent of drugs in the GSK pipeline have reached phase III clinical trials; well above the average for the sector. Two mega-drugs in the pipeline are Compound 115 and Lymphostat-B, both of which could produce multi-million pound revenues.

Rich pickings
Zi Medical, which produces drip monitors, has merged with Oxford NewTech, a private company, in a £5m deal. Zi Medical has two main products, one monitors the flow rate of gravity-fed intravenous lines and the other is a fluid infusion device.

The merger doubles the product pipeline and provides Zi Medical with a direct route into the research network run by Oxford NewTech. The latter includes work on the government defence business, QinetiQ, and the Mayo Clinic in the US.

Oxford runs a drug fingerprinting system which can screen drugs for pathological and toxicity analysis of tissue.

Minster Pharma, a real penny stock in the stock market's bargain basement, edged up 0.08p to 1.62p after Iraj Parvizi, the entrepreneur, sold 60m shares reducing his stake to 40m shares, or 2.6 per cent.

The Author
Malcolm Craig, author of 14 books on varying aspects of investment, is one of the UK's leading investment commentators.

2nd September 2008

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