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Turbulent times

Surging oil prices and a weak US dollar resulted in a turbulent week for stock markets across the globe. Safety fears continued to dog the pharma and biotech sector.

Our weekly review of the pharmaceutical stock market

Surging oil prices and a weak US dollar resulted in a turbulent week for stock markets across the globe. Although the FTSE 100 Index in London managed to cling to its perch above the 5,000 level, investors across the pond watched the US dollar tumble and oil prices increase.

The recent cold snap across the US and much of Europe led investors to fear that oil resources could be drained as a result of increased usage. Oil prices in New York hit their highest price since November last year to touch $52 a barrel, while in London prices threatened to surpass $50. Despite the price hikes, oil cartel Opec promised that producers will act to cool the market if the trend continues.

Jitters in the UK that the Bank of England could be planning to raise interest rates again were confirmed when the Bank of England's Monetary Policy Committee revealed that rates would rise in the Spring unless the economy suffered an unexpected setback. The government also confirmed that the Budget would be announced on March 16.

Meanwhile, in the pharma and biotech sector, drug safety fears continued to dog the industry.

Elan drug withdrawn

Irish pharmaceutical group, Elan Pharma, who had been heading towards safety after a brush with bankruptcy in 2002, was the biggest casualty of the market. Shares in the group plummeted by almost two-thirds of their value after Elan and marketing partner Biogen Idec, suspended marketing and clinical trials of their multiple sclerosis treatment, Tysabri.

The companies revealed that one patient had died after taking Tysabri for two years in combination with Avonex while a second was suspected of developing a central nervous system disease. As a result the companies suspended commercial distribution and urged doctors to stop prescribing the treatment until further notice.

The news is seen as a massive blow for Elan, with investors pinning their hopes on Tysabri to revive the firms' fortunes. Sam Williams, an analyst from Lehmann Brothers, reasoned that the chances of the drug being reintroduced without any changes to the label was “extremely small', while analysts at Code Securities said that the news has put a “massive cloud” over the product.

Competitors including Serono, Pfizer, Schering, Teva and GlaxoSmithKline, which is planning to launch a similar drug in 2008, are all tipped to benefit from Elan's misfortune.

Shire faces generic competition

Shares in Shire Pharmaceuticals took a slight knock after the UK group announced that Teva Pharmaceuticals has filed for US regulatory approval of a generic version of Shire's blockbuster attention deficit hyperactivity disorder (ADHD) treatment Adderall XR.

Adderall XR is protected by a patent that does not expire until 2018, but Shire said that although it is still studying Teva's application, previous attempts to break the patent have been met with lawsuits. Barr Laboratories, IMPAX Laboratories and Colony Pharmaceuticals have all attempted to break the patent in the past.

Separately, Shire and its partner New River Pharmaceuticals are expected to release clinical trial results for their ADHD stimulant NRP104. NRP104 is a new generation of amphetamine-related drug that cannot give the 'high' that can lead some patients to overdose on ADHD treatments.

AstraZeneca hit by research notes

Shares in pharma giant AstraZeneca were also down last week after Goldman Sachs and Dresdner Kleinwort both issued bearish research notes on the Anglo-Swedish group.

Goldman cut the sales forecast of AstraZeneca's cholesterol-lowering statin, Crestor, by 35 per cent to £2.28bn, while Dresdner repeated its `sell' stance and cut its price target.

AstraZeneca also revealed that its chief executive, Sir Tom McKillop, took a pay-cut of more than one-fifth in 2004. The company's annual report stated that McKillop received £1.41m in salary and bonuses last year compared with £1.79m in 2003. The decision followed “disappointing setbacks” for AZ's drugs Exanta and Iressa last year.

Phytopharm partner backs out

Phytopharm was also down after the company announced that its Japanese backer, Yamanouchi, was likely to terminate its regional licensing agreement for its investigational Alzheimer's disease treatment Cogane TM.

Yamanouchi said the move was the result of a review of its portfolio following the merger of the company with Japanese rival Fujisawa.

Vernalis considers share placing

Among smaller stocks, biotech company Vernalis released plans to raise over £30m in a shares placing. The company said it hoped to raise £30.3m by placing 43.25 million new shares at 70 pence each in order to set up an American subsidiary to promote its migraine treatment Frovatriptan.

Cobra signs agreement

However, shares in biopharmaceutical manufacturer Cobra-Bio Manufacturing leapt 5.5p after the company signed a long-term manufacturing agreement with French group Neovacs.

As part of the deal Cobra will supply clinical trial material for a protein biopharmaceutical called TNFa Kinoid.

2nd September 2008


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