Downward spiral

Our weekly review of the pharmaceutical stock market

The UK stock market edged lower in tandem with world stock markets as concerns that soaring commodity prices and rising interest rates would blunt global economic growth. Oil prices hit fresh all-time highs.

Equity prices came under pressure from bond yields moving higher, while investors wait anxiously to see if the US Federal Reserve Bank will raise interest rates as expected by only a quarter of a per cent. People are also waiting to hear the Bank of England's Monetary Policy Committee's stance on interest rates.

There were no big surprises for the stock market from the UK Budget, and the FTSE 100 Index continued to weaken, with the 4,900 mark fast approaching.

Leading UK pharma groups' shares were noticeably softer despite a brief pick-up in sentiment towards the sector. Genentech, a US biotech group, announced good clinical trial data for Avastin, a lung cancer treatment. However, this did not stop the sector slumping to become the third worst performer last week.

GSK shares under pressure

GlaxoSmithKline's shares came under selling pressure from a dual combination of factors. Firstly, the biggest impact on GSK's share price was from mounting concern that the group faced a big fine and harsh new compliance requirements from US regulators, the Food and Drug Administration (FDA). The FDA recently halted supplies of two key GSK drugs because of manufacturing problems at its factory in Puerto Rico. Nomura's analysts warned that the group could face a one-off payment of up to £720m to settle the issues raised.

Secondly, the group disclosed that the FDA had stopped clinical trials for a multiple sclerosis drug that GSK is testing. GSK's treatment is in the same class as Tysabri, which was voluntarily pulled from sale by its owners Elan and Biogen Idec last month.

Antisoma unveils deal

Shares in Antisoma gained some good ground after the cancer drug developer announced a deal with Raylo Chemicals, a Canadian group, to manufacture its AS1411 drug. The quantities produced by Raylo will be among the biggest yet for any aptamer drug and is expected to be sufficient to support further multiple clinical trials.

Oxford Biomedica results unimpressive

Biotech company, Oxford Biomedica, saw its share price fall by 8 per cent to 20p after releasing annual results that showed a narrowing in pre-tax losses to £11.5m. The company's share price has been noticeably lower since merger talks with an unnamed suitor ended last month.

Allergy places shares on market

Allergy Therapeutics enjoyed a useful gain after a large block of its shares, 13.1 million equal to around a fifth of all its shares in issue, were placed on the market. The shares were previously held by Dutch financial services group, ING, and Irish drugs group, Elan. Allergy's chief executive, Keith Carter, said that the exit of ING and Elan enabled new institutional shareholders to participate in the next phase of growth by Allergy Therapeutics as a public company.

Proteome rumours gather pace

After taking a bit of a bath recently, shareholders in Proteome Sciences are hoping that persistent rumours that the company will shortly announce a new licensing or manufacturing deal prove to be true. Shares in Proteome, which uses proteins to develop tests for diseases, moved forward strongly on the back of the rumours.

Medici Bioventures makes debut

On the new listings front, minnow Medici Bioventures, which was formed to invest in biotech companies, made a sparkling debut on the Alternative Investment Market (AIM). Shares in Medici were up 50 per cent on their offer price of 1p. The venture, which raised £500,000 though a placing of its shares at 1p each, has a tiny market capitalisation of only £1.5m. Clearly, its share price gains and losses can shift dramatically in percentage terms because of tiny movements in its penny share price.

Pharmaceutical and biotech companies waiting to float on the stock market will take a keen interest in how Plethora Solutions Holdings, a specialist urology drug developer, fares when it makes its debut on AIM this week. Plethora has raised nearly £9m through a placing and is expected to have a market capitalisation of around £30m.