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On course

The UK stockmarket has evaded worries across the Atlantic about the price of oil to remain on target to break through the 6,000 level later this year

America's Wall Street recently experienced its biggest fall in over two years and wiped out all the gains made so far in 2006 in the Dow Jones index. Reasons? Unsettling news about the price of oil allied with worries over the Iranian political situation. The panic attack failed to leak over the Atlantic to the UK, with the FTSE 100 Index losing only a little - and the UK stockmarket looks on course to move through the 6,000 level during the course of this year.

The pharma sector, having had a poor 2004 has made a strong recovery in 2005 - outperforming the FTSE 100 Index, and looking set to continue its bull run - as fund managers switch in to pharmaceuticals. The main worry in the pharma sector is that analysts continue to seek reassurance that generic competition, which caused AstraZeneca's shares to slump recently, can be kept at bay.

The biotech sector has been lifted recently by bids from pharma giants anxious to boost their drug portfolios but it still needs to open the Initial Public Offering window to attract fresh finance.

Reverse takeover for ImmuPharma
General Industries, a cash shell quoted company, has agreed to buy ImmuPharma, a pharmaceutical research and development company, via a reverse takeover. The two will have a market price tag of £28m.

New boss needed at SkyePharma
Shareholders, led by NAV, a syndicate of investors with a 13.5 per cent stake in SkyePharma have succeeded in ousting Ian Gowrie-Smith, the founder of the company, as chairman. SkyePharma has announced it will appoint a new chairman on February 1. NAV wants to see its preferred choice, Bob Thian, get the job and is reported as saying that SkyePharma's statement about a new chairman is 'unnecessarily provocative' and if a chairman is appointed without their approval `we will simply remove him'.

AstraZeneca dives on generic copycat worries over Toprol XL
Dealers' screens went on to red alert on the news that a US court in Missouri had opened the way for generic competition to AstraZeneca's heart drug Toprol XL 18 months earlier than analysts had anticipated. The definitive decision offers a slim chance of any appeal by AZ.

Toprol XL earned £740m in the US alone last year - or 5 per cent of AZ's yearly revenues. AZ's own broker, Deutsche Bank, slashed its earnings forecast for AZ by 10 per cent in the current year and by 9 per cent for 2007.

Almost £2bn was wiped off the AZ share price on 18 January as dealers reacted to the news that cheaper generic versions of Toprol XL could be on pharmacists' shelves by April 2006. Also at risk from generic competition are AZ's Casodex, a cancer drug, Seroquel for schizophrenia and Nexium for indigestion. Yearly sales of the drugs total a massive £4 billion. Dealers took some comfort from AZ having spent £90m in December 2005 on buying companies that could give AZ up to nine drugs in final phase III trials inside a year and a half. AZ's 2005 results are due out on February 2.

CeNeS Pharma rises on investment hopes
CeNeS Pharmaceuticals saw its share price rise to 7.5p - still in the penny share category. The share price rose on speculation that a big time institutional investor will declare that it has taken a 3 per cent stake. This is the level at which all company shareholdings must be declared to the Stock Exchange authorities. CeNeS Pharma is developing M6G, a post-operative pain relief, along with other drugs aimed at central nervous system problems. The market reckons that the US drug regulators will give M6G the go ahead for phase III clinical trials in the near future.

G W Pharma: Canadian royalties from Sativex start to kick in to the bottom line
G W Pharma, the maker of cannabis-based Sativex, the oral spray for the relief of pain from illnesses such as multiple sclerosis, posted a lower full-year net loss of £7.5m against £13.7m in the previous year. Clearly the market was hoping for better news as the shares, which have more than doubled since last November, fell back by 5p to 147p. The lower loss resulted from the first flow of royalty income from sales of Sativex in Canada. While Sativex is not yet licensed in the UK, the Home Office ruled that the oral spray could be imported from Canada to meet demand.

Shire's shares jump on breakthrough with rival
Shire Pharmaceuticals shares rose nearly 50p to 884.5p on news of the first deal with a rival to shelter sales of Adderall XR, its best selling drug, which is used to help hyperactive children.

Impax Laboratories had indicated it wanted to make a cheaper, copycat version of Adderall XR, but as a result of the deal has agreed not to make a cheap version of Adderall XR before 2010. As a result of the agreement Impax will get permission to sell generic forms of the drug in the US and will pay royalties. Sales of Adderall XR in the US were £520m for the year to end November.

The market is waiting with bated breath for news of similar deals with other generic drugs firms to preserve Shire's Adderall XR patent. If successful, Shire would gain crucial time to move patients on to its next generation of attention deficit hyperactivity drugs. Shire is having talks with Barr Laboratories in connection with litigation over Barr's attempts to produce a generic version of Adderall XR.

Alzheimer's drugs - NICE relaxes position
The National Institute for Health and Clinical Excellence (NICE), which advises the government on which drugs should be prescribed via the National Health Service, has announced that drugs for Alzheimer's should remain available on the NHS for those with a moderate Alzheimer's condition. The decision means that nearly 60 per cent of those who qualified to start on the treatments will continue to do so. There are believed to be between 290,000 and 380,000 Alzheimer's sufferers in England and Wales.

NICE had ruled in 2001 that the drugs could be used throughout the NHS. It subsequently changed its position and provided draft guidance that the drugs were not effective enough to be worthwhile and should no longer be provided at all on the NHS. The drugs cost around £1,000 a year. The worldwide market is worth £1.8bn.

The NICE change of view came after an appeal by pharmaceutical companies and evidence from their trials on patients likely to get the most help from the drugs. The drugs involved included Eisai and Pfizer's Aricept, Shire's Reminyl and Novartis's Exelon, which provide the only licensed treatments for mild to moderate stages of Alzheimer's that causes progressive dementia.

NICE says in its latest draft guidance that it is convinced that patients with moderate Alzheimer's can benefit from the drugs, but not those in the early or late stages of Alzheimer's. The draft guidance on the three drugs now goes out to consultation, and will not be formalised until July 2006. They will then be available to patients with moderate Alzheimer's disease via the NHS. Some 40 per cent of patients with Alzheimer's will be able to get the three drugs on the NHS. However, the pressure to widen the use of the drugs to those in the early and late stages of Alzheimer's will continue. The drugs are the only treatment for dementia

United Drug boosts profits by 16 per cent
United Drug, the wholesaler that handles around 60 per cent of all drugs sold in Ireland, reported profits (before exceptional charges) of Ä49.2m, a rise of 16 per cent on 2004. Sales were up by 6 per cent at Ä1.3bn.

Malcolm Craig is the author of 14 books covering aspects of investment ranging from shares to bonds and gilts to gold. He is one of the UK's most respected investment commentators.

2nd September 2008


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