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Stocks stand strong

Pharma stocks remain attractive as banking sector suffers further setbacks

The UK looks to have entered an 'Alice in Wonderland' economic phase with foolhardy bankers still receiving multi-million pound bonuses – from the taxpayer – in return for accruing a mountain of debt that the selfsame taxpayer is forced to come to the rescue. The tax you pay now and will pay in the future has been and is being funnelled by the Prime Minister and the Chancellor of the Exchequer into the hands of virtually bankrupt banks. The vast majority of senior bankers work to steel clad contracts that cannot be legally broken. Hence the bonuses are guaranteed unless public outrage causes the bankers to relinquish their bonus rights.

Meanwhile, sterling continues to slide providing an extra boost to companies such as those with substantial US dollar and Euro revenue streams. Interest rates may have hit 1 per cent in the UK, but the frequent reductions have had little or no effect in getting banks and building societies to lend more or in encouraging consumers to spend more. The banks are now, belatedly, following the lowest risk route possible for lending to businesses. If you are a would-be homebuyer banks and building societies are reluctant to enter into loan agreements with house buyers who have deposits of less than 40 per cent and have 'ultra safe jobs', preferably in the public sector.

The number of mortgage holders in negative equity is well over the one million mark, and could rise to challenge the record of the three million who went into negative equity in the early 1990s.
The stockmarket is still struggling to keep its head above water thanks to continued bad news from the banking sector, which was compounded over the weekend by damning reports of Lloyds TSB's decision to hook up with HBOS. However, pharmaceutical stocks continue to offer an attractive safe haven with cash rich companies providing excellent dividend prospects for the income seeker.

Sandoz pulls out of IFPMA
Novartis has withdrawn Sandoz from membership of the International Federation of Pharmaceutical Manufacturers & Associations (IFPMA) – making it the first pharma company to do so. The move received a frosty reception from other pharma companies and generic drug makers worried that Novartis' decision will create a two-tier system, which could reduce ethical standards. At the end of 2008 Novartis said it would hold membership of the IFPMA through its patented drug subsidiary Novartis Pharma AG, rather than via its holding company. The move excludes Sandoz, the second biggest generics firm in the world, from the IFPMA revamped code of conduct. 

Antisoma gets boost
Shares in biotech firm Antisoma climbed a little on news that its partner Novartis would evaluate its lead cancer programme, ASA404, aimed at HER2-negative metastatic breast cancer.

Bid for Lombard Medical Technologies
Dealers speculate that a US drug group is interested in bidding for Lombard Medical Technologies. Lombard is cash rich with enough in its coffers to last until early next year and it has a stent graft, Aorfix, which is used in the treatment of aortic aneurysms. Analysts calculate that Lombard Medical Technologies has significant potential in the fast expanding endovascular market.

Medicsight test not covered by state medical insurance
Medicsight, the medical imaging specialist, saw its share price collapse into the penny share bargain basement after its revelation that US officials at Medicare have ruled its CT colonography test will not be covered by US state medical insurance payments as a colorectal screening test. However, Medicsight fought back strongly by emphasising that this is not Medicare's final decision and along with its partner it will fight hard to encourage the public to lobby US decision makers at Medicare to overturn the decision.

The Author
Malcolm Craig is a freelance financial journalist and author.

16th February 2009


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