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A healthy week

Oil prices around the globe continue to apply pressure to the stock markets. However, pharma and biotech recorded a good week, finishing as the sixth best-performing sector.

Our weekly review of the pharmaceutical stock market

Oil prices around the globe continue to apply pressure to the stock markets as prices continue to hover at record levels. An explosion last week at a BP refinery in the US, which supplies 3 per cent of the US's petrol, failed to help matters and sent prices soaring once again.

However, as the UK markets opened for business after a four-day weekend, prices retreated as investors turned their attention to a rising dollar. The dollar reached a five-month high in Japan and yesterday reached a six-week high against the Euro.

Investors also remain concerned that an interest rate rise could soon be on the cards. Minutes from the Bank of England's monetary policy committee meeting earlier this month revealed that two of its members voted for a rise, while seven voted for rates to stay the same.

Although at least one rate rise is expected this year, the vote has prompted fears that this rise could come soon rather than later.

Despite this, it was a good week for pharmaceutical and biotech companies, with the sector romping home as the sixth best-performing sector of the week. Indeed, the food and drug retailers sector finished as the second best-performing sector. Not to be outdone, the health sector followed in third place.

Global markets

The pharma sector also performed well on global markets. US biotech giant Genentech and US pharma companies Wyeth and Bristol-Myers Squibb all made it into the top 20 highest risers of the week.

Investors liked the news that Wyeth is expecting to announce higher earnings guidance for the first quarter of 2005, while Bristol-Myers Squibb was re-rated to underweight by analysts JP Morgan.

Genentech's good performance continues following an announcement from the company that its investigative non-small cell lung cancer treatment, Avastin, had performed well in phase III clinical trials. Shares in the group have increased by 30 per cent since the news, with further results on Avastin expected later in the year.

AZ gets Japanese backing

Anglo-Swedish group AstraZeneca (AZ) also had a promising week. The company revealed that the Japanese Health Ministry had backed the continuous use of its lung cancer treatment Iressa.

Despite finding that the drug did not help advanced lung cancer patients live longer, the ministry concluded that the treatment did help certain groups live longer, including non-smoking patients.

The panel also suggested that AZ should include new guidelines from Japan's lung cancer society in the treatment's instructions.

The news provides welcome relief for AZ, which has been hit by a string of unfortunate events in recent months.

GSK clashes with AZ

However, GlaxoSmithKline (GSK) was hoping to bring AZ back down to earth with news that its asthma treatment had performed better in clinical trials than an AZ treatment.

GSK, the UK's biggest pharma company, said that a study had found that patients who took GSK's Advair had on average 24 more symptom-free days than patients who were administered AZ's Symbicort.

AZ, however, fought back. The company said that patients taking Symbicort had been under-dosed as they were given an average of just 1.8 puffs of the treatment every day. An earlier study where patients received an average of 3.4 puffs of Symbicort a day had concluded in favour of Symbicort.

The news sent both companies' share prices higher.

Vindon plans AIM listing

Meanwhile, environmental control product company, Vindon Healthcare, has said that it is planning to list on the Alternative Investment Market (AIM). The group, which provides laboratory ovens and incubators to pharma firms such as GSK and AstraZeneca, said that it plans to join AIM through a £300,000 share placing.

Last year Vindon reported pre-tax profits of £758,000 on turnover of £2.64m. The placing values the company at £7.9m.

2nd September 2008


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