Malcolm's Market Eye, 5 to 11 May 2007

The UK market bounced into May 2007 on a triumphant note, with the FTSE 100 Index romping ahead to its highest close since September 2000. The reason being mega-bid activity with private equity financiers prepared to bid for the top companies in the land in a strategy of releasing large profits for themselves from selling off frequently undervalued property. Merger mania continues to rage across Europe with share markets there hitting a six-and-a-half-year high.

UK investors shrugged off soaring high street sales, which are providing a further push toward higher interest rates. British shoppers bought at their fastest rate in April 2007 for three years ñ boosted by the warm weather. The CBI recorded 44 per cent of retailers confirming their revenues were higher than in the previous month. In March 2007, the figure was only 32 per cent. In response, manufacturers are increasing output and raising prices.

As is normally the case in a bullish market, investors desert defensive stocks ñ notably pharmaceutical shares ñ in favour of higher risk opportunities. Big pharma companies saw their prices soften: AstraZeneca slipped back, while Shire Pharmaceuticals saw a GBP 0.20 fall in its share price.

Skyepharma ñ business as usual despite new management team
Skyepharma posted a loss before tax of GBP 17.9m on turnover of GBP 43m for FY06, compared with a loss of GBP 20.3m on sales of GBP 50.8m for FY05.

A new management team has taken over at SkyePharma and has tightened the drug reformulation companyís business focus by selling off the injectables arm ñ a sale which threw up an exceptional hit of GBP 20.9m, when added to the hit taken as a result of the restructuring of a financing deal.

Skypeharma received GBP 42m from selling its injectables business to Blue Acquisition Corporation. We can expect to see Skyepharma in the black in two years time. The companyís drug portfolio has some potential stars in Flutiform (fluticasone and formoterol) for asthma, which is in phase III trials.

There are also four other products which should hit the market in the next 12 months, one being the 24-hour Parkinsonís disease and restless legs treatment, Requip (ropinirole). There are two other drugs at an early stage for poor sleeping and pain relief which may be licensed out.

Skyepharma is taking itself off NASDAQ to save time and money, which the market reckons is a sensible move, as most of share dealing in Skyepharma takes place in London.

Allergy Therapeutics ñ hay fever vaccine moves into phase III
Allergy Therapeutics has commenced phase III trials for its hay fever vaccine ñ news which added GBP 0.065 to the share price.

Immupharmaís Lupus treatment to enter phase II trials
Immupharma anticipates that Lupus, its treatment for chronic rheumatic disease is to enter phase II trials in June 2007. There is currently no cure for Lupus on the market.

Stakebuilding at York Pharmaceuticals
Stakebuilding is being carried out at York Pharma. Maan alñSanea, the Saudi billionaire used his investment vehicle Saad to increase his share stake to just short of 10 per cent. York is poised to get UK regulatory approval for Abasol (abafungin), which attacks fungal infections. It hopes to bring Abasol to market by the end of 2007.

Pharmstandard taps into worldís capital market to raise USD 880m
Russiaís fourth largest pharmaceutical company has just raised USD 880m through an initial public offering (IPO). One of the biggest generic drug manufacturers on the global scene, Pharmstandard chalked up a first by tapping into the worldís capital markets.

Pharmstandard has one world famous shareholder in Roman Abramovich, the billionaire owner of Chelsea Football Club. The company announced a huge 88 per cent rise in pre-tax profits to GBP 53m on sales up 50 per cent.

Bioprogress makes maiden operating profit
Speciality pharmaceutical company Bioprogress posted a loss of GBP 2.8m on sales of GBP 9.5m for FY06, compared with a loss of GBP 9.1m on sales of GBP 4.4m in FY05. At the operating level, Bioprogress made its first ever profit.

In the Bioprogress drug portfolio, there are now nearly 50 drugs and medicines which are sold on the US, EU and UK markets. Bioprogress has also linked up with major pharma companies over joint development deals of new drugs from tried and trusted existing drugs through Bioprogressí oral strip technology. Sales were boosted from the astute acquisitions of AirPharma, Segix and Dexo.

Malcolm Craig, author of 14 books on successful investment, is one of the UKís most respected investment commentators.