Fall from grace

The stock market has been trying to climb back after a panic attack, but faces the unpalatable scenario with inflation hitting a nine-year high in September as the Consumer Price Index rose for the fourth month running due to higher petrol prices.

The recent stock market slump came on the 18^th anniversary of Black Monday (October 19, 1987) when the Dow Jones index, measuring US stocks, fell by 23 per cent, the biggest one-day fall in stock market history. UK investors are worried that the long era of cheap money is coming to an end and interest rates will climb higher.

The pharma sector initially benefited as nervous investors moved out of volatile sectors, such as mining, and into defensive areas, notably pharmaceutical stocks. Then came the bad news from US giant Pfizer which wiped nearly £2.5bn off the value of drug stocks as dealers worried that the firm's troubles might be symptomatic of all pharma companies facing aggressive competition and rising costs.

Pfizer plummets as Celebrex loses sales
Pfizer outdid the stock market fall back with its shares dropping 7 per cent as profits for the third quarter crashed by 52 per cent. Figures for the quarter plummeted as sales for blockbuster arthritis drug, Celebrex, fell and cholesterol drug Lipitor also suffered from ailing sales. Demand for Celebrex, the global number one seller for arthritis pain, slumped when it was linked to increased risks of heart attack.

Pfizer also spread further gloom on the market as it scaled down its earnings forecasts for the next two years and reduced its current full-year profit forecast. This is also due to the unpalatable fact that over the next three years Pfizer drugs, with total yearly sales of $10bn, will lose their patent protection.

Third-quarter profits dropped to $1.59bn from $3.34bn for the same reporting period in 2004. A one-off charge of $3.4bn - the result of acquisitions - and the withdrawal of Bextra also had an impact on figures.

Avian flu hits the headlines
The Department for Environment, Food and Rural Affairs (DEFRA) has confirmed the first British case of the deadly bird flu virus following the death of a parrot, which arrived from Surinam in South America last month. DEFRA has confirmed that the bird died in quarantine of H5N1.

Swiss pharma company Roche is one beneficiary of the worldwide panic about avian flu. Its product Tamiflu - Roche produces 100 million capsules yearly - is regarded as the best treatment for avian flu and third-quarter sales have more than doubled as countries buy in the anti-viral ready for a pandemic. Sales of Tamiflu rose to £122m in the third quarter, which boosted Roche's revenues by 17 per cent in the three months ended September. Drug sales overall hit £3bn for the quarter. Sales of Tamiflu could reach £525m this year.

GlaxoSmithKline (GSK) has inhaled flu drug Relenza as a competitor to Tamiflu, but it was not given the green light as it was seen as too expensive and GSK plants producing Relenza were put on hold. However, the threat of a pandemic has seen the plants return to full production.

The company is expected to reveal it could be ready to produce millions of doses of flu vaccine within four months of the declaration of a pandemic. If the World Health Organisation announces a pandemic, vaccine manufacturers would be able to fast track the normal stringent testing and safety procedures applied to all new medicines.

GSK shares have risen almost 10 per cent - briefly hitting a three-year high - over the past month on hopes that Relenza will take off. The company has spent £1.13bn to increase its vaccine manufacturing strengths and made the astute move of acquiring ID Biomedical, the Canadian supplier.

GSK is expected to post strong third-quarter results on Thursday October 27 with analysts expecting a 12 per cent rise in earnings.

Merck sees 7 per cent rise
Merck cheered the market by announcing a 7 per cent rise in third-quarter profits. Revenues fell after painkiller Vioxx was taken off the market, but this was offset by lower raw material costs. Merck earned £800m in the quarter.