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Buying Power

Despite retail sales in the High Street retailers of the land being at a level last seen in 1946, the FT-SE 100 Index powered to a four year high

An electrical plugThe UK stockmarket started its traditional pre-Christmas run early. Despite retail sales in the High Street retailers of the land being at a level last seen in 1946, the FT-SE 100 Index powered to a four year high, touching 5,531 - a level not seen since August 2001. The small cap FT-SE 250 hit a record 8229 - up 11 per cent from its mid-October low point of 7400. Asian and US markets also joined the early bull market party.

Falling oil prices along with soaring gold and copper prices and a record level of bids provide the reason for the seasonal cheer. Plus, of course, the calculations that the record amount of cash raised in multi-billion pound takeovers will be reinvested in the stock market. ABN Amro forecasts the FT-SE 100 Index will rise by 15 per cent in 2006 as a result of robust profits and a continuing flow of bids.

The pharma sector joined in the bull run - and also continued to see some bids and deals of its own in the process. SkyePharma boosted the index after the drug delivery company announced, after an `unsolicited takeover approach', it had appointed investment bank Lehman Brothers to review `all its strategic options'. Running counter to the upward trend GlaxoSmithKline (GSK) fell 58p on news that the US Food and Drug Administration is proposing to change the way that Advair, the best selling drug asthma drug, is labelled and prescribed in the USA.

GSK faces tough new US rules on prescribing Advair

GSK faced an uncomfortable scenario across the Atlantic as the US Food & Drug Administration (FDA) announced that Advair, GSK's best selling inhaler asthma treatment, should be prescribed only when other, milder medicines have not succeeded, and should not be prescribed as a front line remedy. A more restrictive label is proposed for the asthma treatment. The announcement by the US regulator came after a clinical study focused on drugs, including Advair, which incorporate long acting beta-agonists (LABAs), and can sometimes trigger off potentially fatal asthma attacks. The GSK shares fell by 4 per cent to 1439p as £3.5 billion was sliced off the GSK market price tag. Over one quarter of Advair's American revenues stem from doctors prescribing the drug for front line use. Credit Suisse First Boston, the house broker, reduced its estimate for peak Advair sales in 2010 from £2.93 billion to £2.25 billion in the US and cut back overall group sales for 2010 to £28.9 billion. Global sales of Advair were £3.43 billion last year and it is GSK's biggest selling treatment. GSK is fighting back, pointing out that the US label for Advair already has a strong caveat - a 'black box' warning which it introduced in 2003. The US restrictions will not affect Advair's use for treatment of chronic obstructive pulmonary disease (smoker's lung), which accounts for nearly one third of US prescriptions.

Provalis considers a number of offers for its pharma division

Provalis shares slid 30 per cent after the market digested its strategic review, which did not make for happy reading. The gleam in the clouds is that Provalis is considering a number of approaches for its pharmaceutical division. Like the curate's egg there is bad news as well as good. Technical problems with Provalis' analyser 'in2it' continue while US sales are 'disappointing.'

Vernalis boosts drugs pipeline by buying CitaNeuro Pharmaceuticals

Biotech company Vernalis is adding to its drug portfolio by buying the Ontario-based CitaNeuro Pharmaceuticals for up to £38 million. CitaNeuro concentrates on neurology and central nervous system therapies which will complement Vernalis' pipeline. It is currently researching a drug to treat Parkinson's disease and another drug aimed to alleviate neuropathic pain. Vernalis is financing the purchase by issuing 26.9 million new shares.

Acambis - share price falls as third quarter losses rise

Acambis, the vaccine pharmaceutical company saw a dip in its share price of 13.25p to 215.25p on announcing third quarter pretax losses rising from £4.3 million to £10.2 million.

GSK links with Oxford University to set up testing centres in India

GlaxoSmithKline has clinched an interesting deal with the University of Oxford to develop experimental cancer drugs in India, which has proved itself as an attractive drug-testing continent with its enormous population and robust infrastructure of doctors. They include Cervarix, GSK's vaccine aimed to defeat cervical cancer. Cervaris is in the blockbuster drugs category as analysts estimate it could deliver up to £2.2 billion a year in sales. There is also Lapatinib aimed at breast cancer. GSK is to open six testing centres in India. Although India is seen as a cheap sourcing area for Western manufacturers, GSK has taken pains to stress no laboratory research jobs will disappear in the UK.

G W Pharma's cannabis based painkiller can now be prescribed as an unlicensed medicine

GW Pharma rose a respectable 13p to 83p as Paul Goggins, the drug minister, said that its cannabis-based Sativex painkiller can be prescribed to individual patients in the UK as an unlicensed medicine.

Roche and Gilead agree on royalty payments for Tamiflu

Roche and Gilead have clinched a deal over the production of Tamiflu. This drug is seen as the principal defence against an avian flu pandemic. Roche and Gilead had been involved in legal wrangling about royalty payments.

FDA investigates Tamiflu

Shares in Roche fell by 3 per cent on the news that the FDA is investigating Tamiflu, Roche's avian flu treatment, after 12 children in Japan died after taking it. Roche said there was no link between the deaths and Tamiflu and that 11.6 million children have taken Tamiflu since 2001. The FDA said the cause of the deaths was difficult to interpret. Tamiflu is in the blockbuster drug category as it is being bought throughout the world as the best treatment for a potential flu pandemic resulting from avian flu.

Alarm over flu vaccine stocks

The news that the National Health Service is running out of this year's flu vaccine hit the headlines. This is due to public worries over avian flu. The annual flu vaccine would not be the answer to the latter, but demand for the normal flu vaccine has been so great that contingency stocks - 400,000 doses - held by the Department of Health will last only a few days. Around 15 million doses of flu vaccine have been ordered by GPs, but hundreds of surgeries have run out.

Alliance Unichem shares continue to fall

Alliance Unichem shares have fallen over £1 since it agreed a £7 billion merger with Boots in early October. The City is sceptical as to the future success of a pharmacy giant with some 2,600 UK stores - and the merger will upset Alliance Unichem's enviable growth record.

Malcolm Craig, author of 14 books on aspects of investment ranging from shares to gilts, from the money markets to Eurobonds, is one of the country's most respected investment commentators.

2nd September 2008


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