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Selling up for summer

Analysts still debating over possible bear market as period of volatility kicks in

The stockmarket has entered a period of high volatility after losing nearly 10 per cent of its value when it touched bottom in spectacular contrast to its April 2006 high of 6,132. This unwelcome fall gives credence to the stockmarket saying: 'Sell in May and go away - come back on St Leger Day.' A saying which has its roots in Britain's agricultural past when farmers buying stock and planting seed in the spring sold shares to raise cash, returning to the market after the summer harvest and cattle sales had increased their cash reserves.

The volatility follows warnings of higher inflation, higher interest rates, higher commodity prices and a weak US dollar. City pundits are increasingly talking about how long the bear market will last, rather than wondering whether a bear market has actually arrived. This represents a classic scenario for a move into defensive stocks, which notably include the pharmaceutical sector.

Proteome Sciences licensing agreement with bioMerieux
Biotech punters scrambled to buy shares in Proteome Sciences, pushing the share price up by 14.5p to 38p, as news was announced that it had clinched a licensing agreement with BioMerieux to use its bio-markers to detect, diagnose and monitor strokes.

Oxford Biomedica's shares up on TroVax
Another share price on the rise has been that of Oxford Biomedica, the gene therapy group. Phase II trials of TroVax in patients with prostate cancer unresponsive to hormone therapy, is open for recruitment.

GSK grows cancer drug portfolio
GlaxoSmithKline (GSK) is to make 34 data presentations at the next ASCO cancer meeting. There will be 13 on breast cancer pill Tykerb. This will draw the attention of the market to GSK's growing strength in its cancer drug portfolio. Anti-cancer drugs currently account for 5 per cent of group sales.

Barr in lead to scoop up Pliva
US pharma group Barr has burst into the lead in the auction for Pliva, the Croatian generics drugs manufacturer. Pundits calculate Barr has offered $2.1bn for Pliva - well over the $1.85bn improved bid offer from Icelandic rival, Actavis (the world's third biggest generic pharma), after its first offer of $1.6bn was turned down by Pliva as undervaluing the business. According to reports, Pliva's management approve the Barr bid because they will retain their jobs. A Pliva deal would be Barr's first outside the US and would make it the first US pharma to gain a foothold in the European generics market.

Barr and Pliva are already working on a joint venture to make a generic biological version of granulocyte-colony (G-CSF), used to regulate white blood cell production. Nearly two-thirds of Barr's $1bn in sales comes from generic drugs.

Roche wins UK licence for Herceptin
Roche has won its UK licence for Herceptin, the breast cancer drug that costs £21,800 per patient per year in the early stages of breast cancer. There is widespread speculation the drug could be given the green light for wider use in the NHS in the near future. The European Commission granted Herceptin a licence for the drug to be used across Europe for women with early-stage breast cancer after it was recommended by the European Medicines Agency. Research shows that Herceptin can cut the risk of cancer returning by as much as half. The National Institute for Health and Clinical Excellence (NICE) is expected to rule on Herceptin's wider use within the NHS - on the basis of cost effectiveness - soon. NICE's appraisal of the clinical and cost effectiveness of Herceptin is already underway.

Phynova posts £597,000 loss
AIM listed Phynova, the drug development company, posted a £597,000 loss for the half year to 31 March 2006 against a loss of £250,000 for the same period in 2005. Phynova floated on AIM last February to raise £3.6m to develop drugs already in use in China. So far Phynova has six drugs in development.

Fulcrum Pharma moves into the black
Fulcrum Pharma, which is also listed on AIM, turned in a profit of £88,000 for the half year to end February 2006 against a loss of £350,000 for the same period last year. Turnover rose 22 per cent to £7.7m.

NICE holds firm on Alzheimer's drugs offered on the NHS
NICE has held fast to its earlier decision that drugs for Alzheimer's disease should be offered on the NHS only to those `moderately' affected. Those with either mild, or severe, Alzheimer's disease should not receive them, the agency has recommended. The decision means some 80,000 people with mild Alzheimer's will not be able to get the drugs via the NHS. The four drugs under review are Aricept, Exelon, Reminyl and Ebixa. The first three have been recommended for use on the NHS while Memantine should be used only in clinical trials.

Parexel criticised over procedures taken for TGN1412
Parexel, the company that carried out a drug trial which resulted in six men becoming ill, has been criticised in a report from the Medicines and Healthcare products Regulatory Agency (MHRA) for failing to follow certain procedures. However, MHRA decided that TGN1412 had been correctly made and administered. It concluded that the drug's effects were `most likely' caused `by an unpredicted biological action of the drug in humans.'

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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