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Strong corporate earnings and positive economic data from the US have provided further support for the world's stock markets as they continue to climb

SupportOnce again, the stock market has moved forward strongly with the benchmark FTSE 100 index hitting fresh three-and-a-half-year highs, testing the 5,350 mark.

A widely expected cut in the UK base rate, the first since July 2003, from 4.75 per cent to 4.5 per cent helped underpin the market, and the question now preying on investors' minds is whether this is the start of a downward cycle or merely a one-off cut. The majority of economists, however, expect more cuts before the year is out.

Further support for the latest rise came as a number of stock markets around the world climbed to fresh multi-year highs despite oil prices surging to yet new peaks. Strong corporate earnings, and positive economic data from the US also helped improve the backdrop.

AstraZeneca rose higher to yet another new high for this year with more analysts taking a positive view on the stock in the wake of its recent impressive first half figures. Shire Pharmaceuticals also reached its best yet in 2005. Analysts continue to warm to the stock after the company sealed a $1.6bn acquisition of Transkaryotic Therapies, with Citigroup raising its earnings estimates for the group and reiterating its `buy' recommendation.

Potential 'cure all'
Shares in Acambis rose by around a tenth after the vaccine developer and manufacturer, best known for its smallpox vaccine, said that it had started developing a potential breakthrough influenza vaccine that could offer permanent protection against any strain of the virus.

It has entered into a collaboration and licensing agreement with a Belgian research institute to develop this vaccine. If successful, Acambis believes that concerns over a new global flu pandemic would be ameliorated.

At present, there are often long delays in developing a new vaccine to cope every time a new influenza strain emerges. The new treatment should to be ready for clinical trials next year.

SkyePharma's restatement of its results, in accordance with International Financial Reporting Standards (IFRS) instead of only UK Generally Accepted Accounting Principles, had a positive impact on its profit and loss statement for last year.

The company's operating loss narrowed to £3.7m (down from £20.7m) thanks to recognition of milestone payments and the treatment of transactions relating to the funding of its late-stage clinical development programme.

Its shares moved up a little on the restatement, however the accounting changes won't affect the company's cash flow. SkyePharma will prepare this year's figures under IFRS and expects to release its first half figures in September.

Show stopper
Provalis stole the show among the smaller cap pharmaceutical and biotech stocks. Shares in the medical diagnostics and pharmaceuticals group were on fire, with its price soaring nearly 70 per cent after in2it, the firm's flagship diabetes diagnostic product, was certified by the National Glycohaemoglobin Standardisation Program (NGSP).

This certification is important for Provalis because the American Diabetes Association only recommends (and many US healthcare providers in the US will only use) tests that are certified by the NGSP, an independent quality assessment run by the University of Missouri.

In2it is a principal product of Provalis and has marketing clearance from the US regulatory authorities for use in doctors' surgeries and at home on prescription. In recent months, Provalis has started to build brand awareness of this product in the US.

Ark Therapies enjoyed a good gain after revealing that its scientists in Finland have discovered a novel gene therapy delivery technology. Based on a fusion protein, it reduces the risks associated with more conventional gene therapy by inserting new genes selectively at sites in the human genome. It could also greatly improve predictability.

2nd September 2008

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