In the spotlight

Our weekly review of the pharmaceutical stock market

The FTSE 100 Index continues to yo-yo around the 4,900 mark as record oil prices persist in troubling the market. The high value of oil has led the International Monetary Fund to warn that high oil prices are a “permanent shock” to the world and would continue to remain high.

In the US oil prices remain above $53 a barrel, while in the UK the high prices have started to filter through to consumers. UK petrol prices hit a record high of 85.6p for a litre of unleaded petrol, and analysts have warned that prices will continue to rise and may reach new record levels in the Summer.

The pharma and biotech sector was again in the spotlight last week after the government's Health Select Committee released the conclusion of its long-running inquiry into the influence of the pharmaceutical industry. The sector was heavily criticised, with the Committee reasoning that pharma over-markets products for profit. A fundamental review of drugs regulator the Medicines and Healthcare products Regulatory Agency was also demanded.

The sector was also at the forefront of news on global markets after the Singapore government revealed that its country's economy had shrunk by 5.8 per cent in the first quarter of 2005 after the drugs sector slowed.

Pharma has been hit heavily by competition from generic drug makers in Singapore, although the government had forecast that pharma would see flat growth in 2005.

Elan to face inquiry

Troubled Irish pharma firm Elan continues to struggle. The company revealed that it is the focus of “an informal inquiry” by the Securities and Exchange Commission (SEC) into share trading surrounding the withdrawal of its multiple sclerosis treatment, Tysabri.

The treatment was withdrawn from the market in February this year after a patient taking the drug died. The SEC is keen to investigate share trading around the time of the release of the statement but the inquiry is not believed to relate to any specific set of share dealings.

Elan is set to release its first quarter results for 2005 on April 28. The company, however, has lost more than 70 per cent of its value since the withdrawal of Tysabri.

AZ benefits from COX-2 withdrawal

Meanwhile, AstraZeneca was on the up. The Anglo-Swedish group will also release its first-quarter results on April 28 but is expected to announce stronger than expected sales of its heartburn and ulcer treatment Nexium.

Analysts believe that the high-profile withdrawal of Merck's COX-2 inhibitor painkiller Vioxx and the recent suspension of Pfizer's Bextra have increased demand for Nexium - a proton pump inhibitor (PPI).

However, it is thought that the demand may only be sort-lived while healthcare providers search for cheaper treatment alternatives.

GSK secures promotion deal

Shares in pharma giant GlaxoSmithKline (GSK) were also on the rise. The group announced that it has signed an agreement with Swiss drugmaker Roche to market the weight-loss treatment Xenical in the US.

Xenical is the world's biggest-selling prescription weight-loss medication and the deal grants GSK's consumer healthcare division exclusive rights to promote the treatment in the US.

Phytopharm plans another placing

On smaller markets, biopharmaceutical firm Phytopharm announced its intention of a £10m placing to fund further R&D.

The news follows Phytopharm's failed attempt at a placing earlier this year. Then, Phytopharm planned a £23.9m fundraising exercise to help fund trials for Cogane, a possible treatment for Alzheimer's disease, and Myogane, a treatment for motor neurone disease.