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Stick or twist?

The FTSE 100 index, the barometer of the stockmarket's health - or lack thereof - is close to testing the 5,000 level once again.

MagicianThe FTSE 100 index, the barometer of the stockmarket's health - or lack thereof - is close to testing the 5,000 level once again. With the Bank of England keeping UK interest rates on hold - despite a rise in US interest rates - fears of a full-blown recession in manufacturing are receding. The City reckons the next move in UK interest rates could well be down, to stimulate growth.

UK consumers are generally more cautious on the spending front due to fears over job security and a possible economic slowdown. The slide in the world oil price has also provided some much-needed relief; since its peak on April 4 the crude oil price has fallen by nearly 20 per cent.

With all this going on, pharma is winning more converts among City analysts and private investors as it is perceived to provide a solid, defensive investment play for the medium-term.

United Drug on the up
Pharmaceutical distributor and wholesaler United Drug has delighted the City scribblers with yet another record result. It has delivered record results for the last couple of decades and shows no sign of stopping.

Pre-tax profits, before any goodwill hits, came in at Ä22.3m, up 15 per cent in the six months ended March 2005. Turnover rose 3 per cent to Ä634m. Goodbody Stockbrokers anticipates the company will make full-year pre-tax profits of Ä43.8m.

So far, the government's 7 per cent cut in UK drug prices has failed to dent United Drug's business. It is cash rich, with Ä200m available to scoop up acquisitions in the scientific and medical sectors - areas where it is already active.

Like the curate's egg, there were bad bits in the results too. The increasing growth of the parallel drug import market provides aggressive and cheap competition for the company, which saw its contract distribution business affected by the withdrawal of Vioxx and Bextra, COX-2 inhibitors.

However, the drug wholesaling business in Northern Ireland managed to increase profits, as costs were kept to rock bottom and there was a pick up in new business.

New cancer developments
Antisoma, which saw its shares fall following the reorganisation of its portfolio, has announced encouraging data from its new cancer drug, AS 1411 currently in phase I trials.

The data for AS 1411, which isolates tumour blood vessels, was announced at the American Society of Clinical Oncology (ASCO) convention in Florida. Of the 17 patients being tested, seven have benefited from the treatment. Antisoma is now seeking to widen the phase I trial for lung cancer and renal cancer patients.

GSK takes a tough stance
GlaxoSmithKline (GSK) is moving against criminal dealers of AIDS drugs that rack up massive profits by recycling the cut price drugs - supplied by drug companies at cost on humanitarian grounds to developing companies - and sending them back for sale in developed countries at the much higher commercial market price.

By the end of 2005, GSK will have put its anti-fraud identification system into practice. This will involve putting a red coat on normally white tablets to highlight they are destined to be sold at cost to developing countries.

Tablets for sale in developed nations will remain white. Identification will also involve changes in labelling and packaging.

2nd September 2008


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