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The beat goes on

The UK stock market remains fairly upbeat with the FTSE 100 index staying above the 4,800 level. However, the pharma and biotech sector is proving a bit of a drag on the market.

Our weekly review of the pharmaceutical stock market

The UK stock market remains fairly upbeat with the FTSE 100 index staying above the 4,800 level. This is despite some recent softness in other major stock markets and rising oil and commodity prices.

Once again, however, the pharmaceutical and biotech sector is proving a bit of a drag on the market, resuming its place as one of the worst performing sectors. Heavyweights GlaxoSmithKline (GSK) and AstraZeneca (AZ) are pulling the sector down, with AZ sinking to a fresh multi-year low ahead of its annual results.

AstraZeneca struggles

News that Japan's Ministry of Health and Welfare is thinking of banning Iressa, AZ's lung cancer drug, did not help investor sentiment towards the stock. The marketing of Iressa has already been suspended in the US.

Moreover, the French drugs regulator has indicated that it would probably refuse AZ approval to sell Exanta, its new blood-thinning drug. A few months ago, the US Food and Drug Administration refused AZ's application to sell Exanta in the US.

However, encouraging news came from Crestor, AZ's cholesterol drug, which has won approval in Japan.

Investors are hoping that AZ will disclose some encouraging developments in its drug pipeline and good numbers, particularly for sales of Crestor, at its results presentation after a run of bad news in recent months.

GSK weak

GSK shares were weaker after broker, Morgan Stanley, cut its rating on the stock to 'underweight'. The broker believes that GSK's shares have the least upside of its European peers, at around £11.88. It also believes that GSK has benefited from rival AZ's recent problems and dramatic underperformance.

Shire softer

Investors started selling shares in Shire Pharmaceuticals after reports on the deaths of 15 patients taking Reminyl, its treatment for Alzheimer's disease. The Canadian regulatory authorities are leaving Reminyl's status unchanged but are closely examining the drug's trial results for elderly patients to see if it is a possible treatment for mild cognitive impairment. Reminyl is co-developed and marketed under licence agreement with US drugs group Johnson & Johnson.

Shire's share price was noticeably softer on the latest development after hitting a new 12-month high. This boost was achieved primarily on the back of news that it will develop and market a new attention deficit disorder treatment for children. It has also helped that Shire has received recent positive research reports from analysts.

Oxford BioMedica strong

Oxford BioMedica was in the limelight after the gene therapy group confirmed it had received a bid approach. The shares, which were rising strongly anyway, shot up by nearly a fifth on the bid news, to post a gain of almost 33 per cent last week. Its most promising and advanced product is TroVax, an anti-cancer vaccine, which some analysts believe could have the potential to become a $1bn-a-year drug.

The company, which was spun out of Oxford University in 1995, said a few months ago that it had enough cash to finance patient trials until 2007.

Good news for GW Pharmaceuticals

The market welcomed the news from GW Pharmaceuticals that new clinical trial data on Savitex, its cannabis-based spray, shows that it alleviates extreme pain in patients suffering from severe cancer. The phase III trials demonstrated that around 40 per cent of patients receiving Savitex experienced a sharp improvement in their levels of pain.

GW has already received preliminary approval for Savitex in Canada and is close to launching a version of its treatment to help control muscle spasms in multiple sclerosis patients. It is looking to apply for approval of its treatment in the US.

The company is yet to get UK approval for its treatment because of numerous safety and efficacy issues raised by the Medicines and Healthcare products Regulatory Agency. All issues apart from one have now been resolved, according to GW's chairman Geoffrey Guy. GW is seeking to resolve the outstanding issue at the Commission on the Safety of Medicines and, if successful, would be granted a UK licence, he said.

Ark Therapeutics up

Ark Therapeutics, whose shares trade well below the price they were floated at last year, enjoyed a useful advance of more than 5 per cent last week after a major shareholder, the Merlin Fund, sold 5 million shares. The Merlin Fund still has a stake of around 7 per cent, or 7 million shares, in Ark. Ark's current share price of 90p would have to rise by around 50 per cent to get back to its flotation price.

Theratase advance

Shares in Theratase, the specialist enzymes manufacturer and supplier, posted a delayed strong advance after the market initially ignored both its statement that its prospects remain good and the disclosure of annual figures that were broadly in line with expectations.

Pharmagene firm

Shares in biotech company Pharmagene firmed after a bout of weakness earlier last week on news that its chief executive Alastair Riddell would be leaving. Riddell joined the group in 1998 and guided Pharmagene through flotation in 2000.

2nd September 2008

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