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Summer trading

Lacklustre trading on the UK market is likely to continue into the summer, despite strong growth in May

sunglassesThe FTSE 100 Index continues to drift below the key 5,000-level - after a strong performance in May - and thin trading is likely to continue into the summer as the holiday season gets going. With low-share volume trading, most of the bullish action is taking place in the shares of quoted British companies which might go to a bid - typically companies which are rich in property, if light on profits.

Bearish factors include political uncertainties as the future of the European Union hangs in the balance, along with disappointing industrial production data from the Eurozone, the US and the UK.

Against a backdrop of stable interest rates - the Bank of England is likely to keep interest rates on hold at its meeting on June 9 while US rates are seen to be near their peak - and weakening industrial conditions in the UK and Europe, the pharma sector is seen as an attractive alternative to investors when compared with the troubled UK manufacturing sector.

On the horizon

The European Commissioner for industry and enterprise, G¸nter Verheugen wants to see Europe's pharma and biotech sectors become much more innovative in order to take on US competitors more effectively. The commissioner isn't uttering empty words either; he is taking his plans to the European Commission in order to speed up the time taken by smaller pharma companies to get their drugs to the market.

GlaxoSmithKline (GSK) is looking at Boots' £1bn - £1.2bn over-the-counter medicines business, Boots Healthcare International, which was put up for sale in April. Boots plans to publish a prospectus outlining this side of the business, which makes Nurofen, Clearasil and Strepsils, and will make is available to potential bidders in July. The auction is being run by investment bank Goldman Sachs and other interested bidders are thought to include Roche and Bayer, along with a clutch of private equity houses.

GSK has also submitted its application to the US drug regulator for its Fluarix flu vaccine, currently sold in 75 countries.

Shares in the company rose after Man Securities slapped a £16 price tag on shares allied to a buy recommendation, saying that `the earnings model over the next five years is significantly less risky and therefore more certain of delivery than its peers'.

Celsis, the microbiology detection and laboratory services company, posted record pre-tax profits of £5.75m up 19 per cent for the year ended March 2005, with a turnover of £30.4m up 10 per cent. Laboratory equipment sales to the pharmaceutical industry pushed ahead by 7.3 per cent to £7.78m. Celsis has been making strong sales of its vaccine-testing kit since its flu vaccine, ordered by the US government, was contaminated in 2004.

The company is virtually unchallenged in the market of testing for microbial infections in personal care products and beverages. Clients include Coca-Cola and Gillette.

Orthopaedics firm Smith & Nephew lost ground as dealers speculated on when the group will obtain approval for its Birmingham hip resurfacing procedure which has been sent to the Food and Drug Administration for US pre-market approval.

Another company to lose ground in the market was Elan. The firm saw its share price plummet following US media reports surrounding concerns over its multiple sclerosis drug Tysabri.

I spy

GSK, Pfizer and Johnson & Johnson have been talking to Netrank, the computer consultancy which has software designed to pick up internet chat on medicines. It can sieve and save vital patient opinions on drugs being exchanged via news groups and web logs and pick up early signals of side effects. However, the Patients' Association and government bodies have voiced concerns about how the information collected will be used.

2nd September 2008

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