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Investor sentiment is fragile with the blue chip FTSE 100 index struggling to stay above the 5,700 mark. On Monday, there was a sharp fall in Wall Street on the back of an inflation warning from Ben Bernake, the Federal Reserve chairman.

Global equity stock markets are nervous and extremely volatile as investor fears of further rises in interest rates, especially in the US, as well as a slowdown in world economic growth, continue to mount. Meanwhile, as oil prices rise due to geopolitical tensions, mainly caused by Iran's nuclear policy, and market conditions continue to toughen, the UK stock market is still marginally ahead of where it started the year.

Leading pharma stock GlaxoSmithKline (GSK), despite its perceived defensive qualities at a time of great market uncertainty, came under pressure after reports surfaced that it was ready to pay upwards of $15bn for Pfizer's consumer healthcare business. The City was expecting GSK to pay around $1bn less. The acquisition would make GSK the number one global player in the over-the-counter medicines market. It is currently second after Johnson & Johnson.

GSK, however, made up the lost ground earlier this week after releasing positive clinical trial results for Tykerb, its orally-administered breast cancer drug. The trial results were reported at the American Society of Clinical Oncology.

Shares in the Irish drugs group, Elan, were marked down heavily on Tuesday morning, after a good run last week on expectations of positive news about its multiple sclerosis drug, Tysabri. In the event, the US Food and Drug Administration (FDA) has allowed Tysabri to return to the market but only under certain conditions, such as revised labelling with enhanced safety warnings.

Innovata, the biotech group, that attempted a merger deal with SkyePharma, enjoyed one of the biggest rises among all small cap stocks last week after it said that it had been given the green light by the FDA to start marketing Adept, its treatment for internal scarring. This product, which will be marketed in the US by Baxter International, is estimated to have peak sales of between $100m and $150m.

Innovata also reported a strong turnaround in its financial fortunes to post sizeable interim pre-tax profits, compared with significant losses in the previous period a year ago. It managed to achieve good results, thanks mainly to a big increase in sales, particularly of its inhalers, and a massive jump in payments from licensing deals.

However, Shares in Antisoma, the UK cancer drug specialist, lost nearly a fifth of their value, after Roche decided to terminate its joint collaboration to develop two of the company's lead drugs under development, AS1404, a treatment that shrinks tumours, and R1550, a breast cancer treatment. The Swiss group has a 5.6 per cent stake in Antisoma, and, in terms of the licensing deal struck in 2002, would have made major contributions towards funding development of these two drugs.

Roche did not provide specific reasons why it no longer wants to invest in these products but did state that it remains committed to its collaboration and would continue to evaluate new drugs under development by Antisoma. There is a fair chance that other pharma groups might sign a licensing agreement for the two products. Antisoma could run out of money within the next eighteen months or so caution analysts, and they point out that the company might have to go cap in hand to the City to raise fresh funds if it fails to strike new licensing deals.

Elsewhere, GW Pharmaceuticals, which manufactures Sativex, a drug for the treatment of multiple sclerosis, derived from cannabis, was weak ahead of its R&D day and release of its interim figures on June 20. This was despite news of a research study that proves cannabinoids can be effective, with minimal side effects at low doses, according to professor Mervyn King from Imperial College London.