Breaking barriers

Our weekly review of the pharmaceutical stock market

The FTSE 100 Index broke through the 5,000 barrier for the first time in over two-and-a-half years last week as takeover speculation in a number of sectors continued to excite investors.

London markets last breached the 5,000 level in May 2002 and investors are confident that the Index can maintain its high perch. True to their word, the Index held firm to remain above the 5,000 mark this week.

Companies in the pharmaceutical and biotech sector had a mixed week as firms begin to reveal full-year and fourth quarter results to investors. Safety concerns were also affecting the stocks of some companies.

Shire slumps

Shire Pharmaceuticals felt the brunt of the safety concerns sweeping the pharmaceutical industry after Canadian drugs regulator, Health Canada, ordered the group to withdraw its attention deficit hyperactivity disorder treatment, Adderall XR, from the Canadian market.

Health Canada took action after reports indicated that the treatment could have caused the deaths of 14 children and six adults taking the medication. None of the reported deaths occurred in Canada.

Although Shire agreed to withdraw Adderall XR, the company stood by its treatment: The company strongly disagrees with the conclusions drawn by Health Canada and is considering appropriate responsive action, it said in a statement.

Shares in Shire slumped as much as 12 per cent on the news, with Adderall XR seen as Shire's key product.

GSK results

GlaxoSmithKline (GSK) saw a welcome rise of its share price as the UK pharma giant released its annual results for 2004.

Although GSK revealed a sales deficit of more than £1.5bn - mainly due to generic companies selling low-cost versions of the company's blockbusters Wellbutrin and Paxil - GSK's chief executive Jean-Pierre Garnier, was eager to highlight the strength of products in the firm's pipeline.

Garnier revealed that GSK now has 45 products in phase II clinical trials, with data from 15 of these trials expected to be announced later this year. GSK also boasts blockbuster potential products in phase III trials including Cervarix, a cervical cancer vaccine.

Analysts have estimated that Cervarix could generate sales of approximately $1bn a year. However, Garnier stressed that this estimate was too low.

GSK revealed turnover for 2004 of £20,359m, with turnover increasing by 10 per cent in the US and 7 per cent globally. Global sales growth was up 1 per cent, with sales of heart disease treatment Coreg, diabetes treatment Avandia and epilepsy treatment Lamictal up by over 30 per cent.

Elan hopeful

Also announcing their results last week was Elan Pharma. The once financially-stricken pharma firm released upbeat figures and is hopeful that it can return to profit by the end of next year.

Elan also revealed that it had settled its long-running disclosure fraud case against the US Securities and Exchange Commission (SEC) for $15m. The SEC had alleged that Elan had failed to disclose material about its financial performance in 2001 and 2002. The case was settled without Elan either denying or admitting to the allegations.

The company reported losses per share for the year of 96 cents, down from $1.43 last year, and a reduced annual net loss of $394.9m.

Investors, however, remain hopeful that sales of Elan's multiple sclerosis treatment Tysabri will remain strong.

CAT's losses widen

Cambridge Antibody Technology (CAT) also released results last week but the UK biotech company has little to celebrate despite a positive fourth quarter.

The group reported a 22 per cent increase in losses for the fourth quarter of 2004 to £11.7m, and a 29 per cent decrease in revenue to £2.7m. Losses per share were also down to 27.4p from 22.5p.

CAT had revealed a major research and development alliance with AstraZeneca and won a legal dispute with Abbott Laboratories in the last few months but the earnings from these developments did not appear in the results.