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Reach for the sky

Fuelled by merger and takeover activity, the London stock market is moving forward strongly. Good gains were recorded by most pharma and biotech stocks.

Our weekly review of the pharmaceutical stock market

Fuelled by merger and takeover activity and speculation, the London stock market is moving forward strongly. The FTSE 100 Index is at its highest level since mid-2002, ahead of a determined assault on the psychologically important 5,000 level.

Good gains were recorded by most pharmaceutical and biotech stocks, including Anglo-Swedish company AstraZeneca. The group has continued to bounce higher after recently sinking to a multi-year low.

Takeover speculators are sniffing around some of the biotech stocks in particular. No doubt they were disappointed that biotech takeover candidate, Oxford BioMedica, announced that merger talks with an unnamed suitor have ended. Its share price plunged by a fifth as a result.

Alliance secures deal

The market liked drug wholesaler and retailer Alliance Unichem's deal that will simplify its trading relationship with Galenica, a Swiss group in which it has a 25.5 per cent stake. Alliance purchased an 80 per cent stake in Alloga - a healthcare logistics and wholesale group - and will sell its interest in Alloga's Swiss business to Galenica. Alliance is also selling its 50 per cent stake in Swiss pharmacy chain, GaleniCare, to Galenica, which owns the other half of the business.

Alliance is set to enjoy a net-cash inflow of around £20m after the transaction is completed by an expected end-April. In the wake of the deal, Alliance's shares moved to yet another new high. The company's shares have been a star performer among the blue-chip companies within the pharma sector over the past year or so.

Analysts wait for GSK news

Ahead of its annual figures, GlaxoSmithKline managed a useful gain to move above the £12 level. Analysts are generally expecting full-year figures to show a slight drop in profits and sales, and are eagerly awaiting news about developments in its drug pipeline.

Phytopharm plans fundraising

The market positively received news of a £23.9m fundraising exercise by Phytopharm, a biotechnology company that specialises in developing medicines from plants. The company said it would sell 13.26 million new shares at a price of 180p each - around a 7 per cent discount to the price the shares were trading at before the announcement of the share offer.

The cash raised will help fund trials for Cyogane, a possible treatment for Alzheimer's disease, and Myogane, a treatment for motor neurone disease. In December Phytopharm signed a licensing deal with Unilever, the global consumer goods giant, for an appetite suppressant it is developing, derived from a Southern African cactus.

York acquires Molecular SkinCare

Among the small-cap stocks listed on the Alternative Investment Market, York Pharma shares shone brightly to rocket by nearly a quarter in value. The company announced that it would acquire Molecular SkinCare, a dermatology products developer, in an all-paper deal worth around £5m. Chief executive, Terry Sadler maintained that the deal could transform York.

Ardana waits in wings

It is encouraging for investors in the biotechnology sector that a number of biotech companies are waiting in the wings to float on the London stock market. According to media reports, Ardana Bioscience, a Scottish biotech company that owns the rights to market medicines under development by the Medical Council's Human Reproductive Sciences Unit in Edinburgh, is planning a flotation in early March. However, no final decision has been made.

2nd September 2008

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