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Prophet of doom

Pharma shares continue to hold up as attractive defensive shares despite warning of hard times ahead
Stockmarkets around the world took hope from better-than-expected US economic data which revealed that the US Fed's long curve of interest rate rises is close to peaking out and may be kept on hold for a while. Following the global trend, the UK stockmarket rose last week by 83 points as measured by the FT-SE 100 Index. This week - starting on August 20 - it has drifted along in thin trading. So far, at least the UK stockmarket has failed to move into a full blooded bear market phase as forecast last May when it lost 10 per cent of its value, but is still moving sideways fuelled by news of bids and deals, actual and rumoured.

Pharmaceutical stocks continue to hold up as attractive defensive shares in uncertain times while the City is awaiting more biotech bids over coming months, which keeps biotechs with promising drug pipelines buoyant. However, doomsters in the stockmarket are increasingly worried about the long-term viability of the pharmaceutical industry, and have been given food for thought by a speaker at a recent conference. According to US magazine Bio-IT World, Steven Paul, executive vice president at Eli Lilly, forecasts that developing a new drug will cost £1.1bn by 2010. He warns that the cost of bringing a new drug to the market could be a potential kiss of death for the pharmaceutical industry. In his view the problems lie in generic competition, pressure on prices, higher R&D costs and the fact that the US Food and Drug Administration (FDA) is approving fewer drugs.

Antisoma shares jump on licensing interest in cancer drug
Shares in Antisoma received a shot in the arm when the company told its shareholders that it is receiving strong interest in licensing its lung and prostate cancer drug AS1404. Back in June, Roche decided not to exercise its option on AS 1404 - and also returned the rights to R1550, Antisoma's breast cancer drug.

Minster Pharmaceuticals rises on stakebuilding by Iraj Parvizi
Penny share Minster Pharmaceuticals rose 0.5p to 1.6p as the market woke up to serial entrepreneur Iraj Parvizi buying 50.6m shares, or 3.24 per cent of the equity.

Vectura - good news on Parkinson's trial drug
Vectura announced good news from its phase IIa trials on its inhaled drug for Parkinson's disease. The trials declared the treatment is safe and well tolerated among the 24 patients who were included in the trial. The inhaled drug focuses on the sudden interruptions when sufferers of Alzheimer's find themselves unable to move in their 'off periods'. The drug took an average of around 10 minutes to work.

Napo joins London stockmarket
Napo Pharmaceuticals of California, the biotechnology company which concentrates on drugs for diarrhoea, has joined the main London stockmarket to raise £11.9m at 83p a share, giving it a market price tag of £41m. One leading Napo drug in phase III trials is Crofelemer, which could join the blockbuster drug category if approved in 2008. Crofelemer is used to treat irritable bowel syndrome and AIDS-related diarrhoea. The drug is made from rainforest plants and has fast track status in the US.

Genetix driven ahead by cell biology products
Genetix, the cell biology products company, announced pre-tax profits up 5 per cent to £1.17m for the half-year to 30 June 2006 on turnover up 4 per cent at £6.02m. Sales of its new cell-biology products rose by 15 per cent - to a level at which they account for 25 per cent of total sales and provide the main drive for future growth. Gross profit margins jumped from 53.1 per cent to 54.6 per cent. Dealers were cheered by the news that Genetix may be on a sustained upturn and that the trading figures for the second half of the current year will be even better. The company assists pharmaceutical companies to develop biological drugs - helped by Genetix' robotic research tools. Sales of services and consumables linked to its cell-biology products rose 17 per cent to £1.6m.

NICE rules against bowel cancer treatments as not cost effective for NHS
The National Institute for Health and Clinical Excellence (NICE) appraisal committee has ruled out the use of Avastin (bevacizumab), made by Roche and Erbitux (cetuximab), made by Merck, for advanced bowel cancer arguing that they are not cost-effective and that neither drug represents a good use of scarce NHS resources. Bowel cancer is the second biggest cancer killer in the UK after lung cancer. 35,000 people develop bowel cancer every year and 16,000 die from the disease, of whom 9,000 make it to the advanced stage that Erbitux and Avastin are designed to treat. Avastin costs £18,000 for a 10 month course of treatment and increases average survival by five months, to 20 months when added to chemotherapy treatment. Erbutix slows bowel cancer by at least four months in 50 per cent of patients treated when combined with chemotherapy treatment which shrinks tumours, clearing the way for surgery, and costs £11,200 for a 16 week course.

Malcolm Craig is the author of 14 books on different aspects of successful investment ranging from the stockmarket to gold, from overseas property to gilts. He is one of the country's most respected investment commentators.

2nd September 2008

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