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Weathering the storm

The UK stockmarket had a brief rally this week but this proved to be no more than a 'dead cat bounce'. The credit crunch crisis, slowing US economy and rising commodity prices, continue to be major problems for investors. The slump has hit British pension funds hard adding almost £40bn to UK corporate pension funds' combined deficit. The first quarter of the year has seen the Footsie fall by nearly 12 per cent - the worst start to a year since the launch of the Footsie 24 years ago.

Pharma is facing serious issues as valuations hit record lows

The UK stockmarket was a brief rally this week but this proved to be no more than a 'dead cat bounce'. The credit crunch crisis, slowing US economy and rising commodity prices, continue to be major problems for investors. The slump has hit British pension funds hard adding almost £40bn to UK corporate pension funds' combined deficit. The first quarter of the year has seen the Footsie fall by nearly 12 per cent - the worst start to a year since the launch of the Footsie 24 years ago.

The pharmaceutical sector, normally a safe haven in troubled times on the rationale that people continue to fall ill whether there is a recession or not, pulled the stockmarket down as it drifted south. Morgan Stanley warned that record low valuations mean the sector is facing some serious worries.

AZ gets boost from Crestor trial

Bucking the trend AstraZeneca (AZ) rose 2 per cent as it ended a major study on Crestor. The company halted the clinical trial for Crestor early after it received 'unequivocal evidence' that the cholesterol-lowering drug showed clear advantages over a placebo.

The release of the study data came at a good time for AZ as cardiologists raised worries about rival Vytorin, the most advanced statin drug available. Crestor's revenues could hit £1.7bn this year and £2.7bn the next.

Intercytex seeks backing for serious wound product
Intercytex, the speciality pharmaceutical and biotech firm, posted a pre-tax loss of £11.6m on sales up 34 per cent to £111,000. The company's lead product is a treatment for serious wounds and Intercytex is seeking financial backing of £9m to develop its four products to the clinical development stage. It is looking for a commercial partner rather than calling on its shareholders for fresh funds.

The serious wounds product is ICX-PR0 and we should see data from the phase III trial early next year - and at the same time a US marketing and distribution deal could be sealed.

Tepnel Life Sciences moves into the black
Tepnel Life Sciences has announced a pre-tax profits of £1.27m on turnover of £18.34m for the year ended December 2007. This compares with a loss of £20,000 on sales of £16.16m in 2006.

Demand for its molecular diagnostic equipment is robust - the equipment is used to monitor foetal distress, genetic diseases and transplant compatibility. Sales from the equipment bounced up from £7.72m to £10.3m with sales of reagents up 55 per cent.

There is also healthy demand for a DNA-based assay launched last year, which is used for quick detection of genetic abnormalities, such as Down's Syndrome, during pregnancy.

Tepnel, which is looking for 'synergistic  acquisitions, has reported a good start to 2008 and brokers expect sales to hit at least £21m and a doubling in profits - the company still has £22m of tax losses available.

Hutchison China Meditech share price plunges
Hutchison China Meditech, which produces traditional Chinese medicines, announced a loss of £10.2m on turnover of £65.1m for the year ended 2007. This compares with a loss of £5.77m on turnover of £50.43m in the previous year.

Punters are uncertain as to when the company will move into the black, or whether it will be broken into three divisions - it also has a drug discovery division and a chain of body and skin product shops in London, with five more shops due to open in 2008 bringing the total to 12.

Shares have slid back to 100p against the flotation price of 275p back in May 2006.

Last year the healthcare division produced an operating profits of $4.4m against $2.5m in 2006, with sales up 28 per cent to $61.4m. The Chinese government is enlarging its State Basic Medical Insurance programme, which is good news for this division.

There is also blue sky in sight for the drug research division - last year the company pulled in stage payments from three major US drug and skin care companies. It is starting a worldwide phase III trials on a treatment for inflammatory bowel disease.

The Author
Malcolm Craig is a financial journalist and investment commentator.

3rd April 2008

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