Fresh wave

A wave of selling by investors taking profits in the wake of the stock market climbing to fresh four year highs pushed the leading index, the FTSE 100, firmly below the 5,500 level.

Overall investment sentiment, however, still remains bullish with strategists expecting the UK and leading stock markets around the world to end the year on a strong note. The outlook for further gains has strengthened with falling oil prices boosting growth prospects for the world economy and dampening expectations of rising inflation and interest rates.

Some autumn gloom descended on the pharmaceutical and biotech sector to make it one of the worst performing sectors last week. Even so, it remains among the best performing sectors this year. The latest bout of underperformance arose mainly because it was dragged down by GlaxoSmithKline, which was hit hard after US regulators restricted the use of its top-selling asthma drug Advair. The shares, which have risen strongly recently to a new high for the year, were not helped by house broker CSFB cutting sharply its sales forecast for the drug and reducing its rating for the share to neutral because of the labelling requirements of the US regulators for Advair.

Rival AstraZeneca's shares were lower initially because of concerns that its asthma treatment, Symbicort, might also be affected. Its share price, though, subsequently moved ahead smartly on news that it had started tests on an experimental lung cancer drug. The group also announced that it is suing Ranbaxy Laboratories to stop the Indian drugs group from launching a generic version of its top-selling ulcer drug, Nexium.

SkyePharma was the focus of a lot of attention following news that Innovata, a smaller company, formed out of the merger of ML Laboratories and Quadrant, was the suitor for the drugs developer. There was some disappointment in the market, where speculation was rife that Swiss drugs groups Novartis and Roche were interested in acquiring SkyePharma. A report in the weekend press maintained that leading shareholders, who are unhappy with the way things have panned out in recent years, are thinking about making an attempt to oust Ian Gowerie-Smith as chairman.

The rollercoaster white-knuckle ride in Phytopharm shares continued at a giddy pace. The shares in the drug maker from medicinal plant extracts, among the best performing small cap stocks last week, screamed up to 115p on Monday on the back of a weekend press report before plunging to around 72p after disappointing trial results from Cogane, its Alzheimer's disease treatment. Richard Dixey, the chief executive, said the results were grey rather than black and that a longer-term study was needed to show Cogane's effectiveness. He added that We will immediately discuss these data with potential licensing partners and look forward to the future development of this product.

Meanwhile, rumours once again surfaced strongly that Proteome Sciences is set to announce a long-awaited licensing deal. Speculation centres upon Abbott Laboratories as the likely partner.

Shares in Cambridge Antibody Technology (CAT) were unchanged after the company unveiled results for the year to end-September showing a dramatic narrowing of pre-tax losses from £38 million to £580,000. It was the settlement of a royalty battle with Abbott Laboratories, the US drugs group, that transformed the figures through the release of backdated payments, which had been withheld during the legal wrangle. Reported sales for the year soared from £16 million to £194 million mainly because of royalty payments received from Abbott for Humira, its treatment for rheumatoid arthritis.

CAT is now concentrating on its strategy of building a proprietary pipeline along partnership deals, according to Peter Chambre, the chief executive.

Annual figures from York Pharma, the developer and marketer of pharmaceutical products that focus on the dermatology field, were not that well received. Its share price was marked down significantly after it reported a more than fivefold increase in its loss before taxation of £2.7 million for the year to end-September. Chief executive, Terry Sadler, however, noted that first revenues from its lead product, Abasol, are expected next year and that six other key pipeline products are progressing through their development and clinical trial phases to timetable and within budget.

Elsewhere, Acambis' share price made good ground after the vaccine developer and manufacturer announced that it had started a Phase I clinical trial of its investigational vaccine against Clostridium difficile in elderly patients.