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Crest of a wave

An activity has given the FTSE the boost it needed to burst through the 6,000 mark on its way to an all-time high at Christmas, if analysts are to be believed

The bulls have got the bit between their teeth and share prices on the UK stockmarket have raced ahead to 6,172 as measured by the FTSE 100 Index, marking a five-year high. Dealers are talking the market up to hit the 7,000 level by Christmas, superseding its all-time high on the last day of trading in 1999 when the FTSE 100 Index hit 6,930.

The UK stockmarket has boomed ahead for two main reasons: firstly, due to the record level of bids and deals, both actual and speculative; secondly, thanks to talk that the Governor of the Bank of England no longer believes there is a 50:50 chance that inflation will rise beyond its target range by Christmas due to the plunge in the oil prices.

A further interest rate rise could be averted and, in response, bullish investors have hiked up share prices through heavy buying. Across the Atlantic, Wall Street soared over the 11,000 level for the first time, while shares with smaller price tags drove the FTSE 250 index to a record level of 10,400, before falling back slightly to 10,378.

The merger wave continues to roll on relentlessly in the pharma sector as the big league firms gobble up their smaller brethren in order to supplement their pipelines. M&A activity is also being boosted by continued fears of a bird flu pandemic, which is turning the low profit margin vaccines sector into one of the fastest growth areas of the pharmaceutical industry, as companies such as Pfizer buy in vaccines knowledge.

Negotiating table
Barr Pharmaceuticals is poised to buy Pliva of Croatia, having already built up a 70 per cent share stake in the Croatian firm. The acquisition, worth £1.4bn, will create the world's third biggest generic drug maker. Barr and Iceland's Activis have been fighting it out for ownership of Pliva in recent months giving the Croatian company plenty to think about.

Meanwhile, Antisoma, the UK cancer specialist company, is in advanced discussions with big pharma companies to license its cancer drug AS 1404. The company is hunting for a partner to assist Antisoma develop and market its leading drug.

Up and away
Cambridge-based Lab 21 is to float on the stockmarket in 2007. Merlin Biosciences, a vehicle of Sir Christopher Evans, the biotech entrepreneur, set up the company.

Lab 21 has developed cutting-edge science to diagnose illnesses at an early stage. The development also enables patients with a family history of cancer or heart disease to be tested to establish whether they may suffer similar problems. The market price tag for Lab 21 could be £30m to £40m. It has yearly sales of £8m.

Separately, Merlin Biosciences has acquired Newmarket Labs, the infectious diseases specialist, for £4m.

Premier Research, the pharmaceutical services company, posted pre-tax profits of £650,000 for the six months ended July 31, down 28 per cent on the same reporting period last year, on sales of £14.6m. The impact on the bottom line has been caused by Premier's acquisition in July of US clinical research group, Scriex Corp, for £16.2m. The cost of post-merger restructuring has had a significant effect on Premier which otherwise would have posted a profit of £3.1m, an increase of 97 per cent.

The company is doing well from the trend by major pharmas to outsource their late-stage clinical trials to specialist research companies. Premier is having a good year and has £100m of outstanding work in its pipeline and over 150 customers on its books. Broker Brewin Dolphin is looking for profits for the full-year of £9m against £3.7m in 2005-6.

Immupharma, the biotech company, saw its share price rise as dealers speculated that its treatment for Lupus, IPP-201101, has been successful in phase II trials. The market for the drug is estimated at up to £3bn. Lupus is a chronic rheumatic disease of the joints and muscles. If the rumours are to be believed, the US Food and Drug Administration could fast track the drug through final trials.

Malcolm Craig is the author of 14 books on different aspects of successful investment ranging from the stockmarket to gold, from overseas property to gilts. He is one of the country's most respected investment commentators

2nd September 2008


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