Strong finish

A fresh bout of hectic merger and acquisition activity enabled an increasingly volatile market to end a particularly rough October in fine style with the FTSE 100 index surging more than 100 points to above the 5,300 level on October 31.

The index of leading stocks may have enjoyed its best one-day point gain in two-and-a-half years, but it still ended October down several per cent, as investors continue to worry about inflation and higher interest rates, particularly in the US.

GSK rides high

GlaxoSmithKline (GSK) did not join the party as it was suffering a bit of a hangover after staging a shining performance, gaining almost 6 per cent, towards the end of last week. The shares swam strongly against the market’s downward flow to hit a new closing high of 1473p for the year in the wake of well-received third-quarter figures, which surpassed analysts’ expectations.

Good sales growth was seen in its key drugs, notably Avandia, a treatment for diabetes, and Advair, its asthma drug, lifting third-quarter sales by 9 per cent to £5.4bn.

Net income rose by around a fifth to £1.3bn. Investor sentiment was boosted by a strong performance from its vaccine business and news that it was accelerating the development of Relenza ahead of a possible flu pandemic.

GSK’s share price was buoyed by UBS’s decision to raise ratings from "neutral" to "buy" with an increased price target of £17. The Swiss bank’s stockbroking arm thinks that double-digit earnings growth is achievable in 2006.

GSK also benefited from an accidental publication of internal estimates showing earnings at 79.9p a share for this year, which would be at the top end of the range of analysts’ forecasts.

Off course

AstraZeneca’s third-quarter results, however, were not well received with the market generally disappointed by its sales growth figures. The shares lost 3.4 per cent after the group reported a 23 per cent rise in third-quarter pre-tax profits with turnover for the nine months of $17.7bn compared to $15.6bn in the same reporting period last year.

A cut in R&D costs helped profits advance while increased marketing expenses helped increase sales and raise operating margins. Combined sales of its five best-selling drugs rose by more than a fifth.

Shares in Elan lost significant ground after the Irish group announced that it had spent almost $17bn over the past three months on Tysabri, its multiple sclerosis treatment. However, third-quarter losses more than halved and revenues rose by a third.

Moving on

Cambridge Antibody Technology (CAT) finally settled its dispute with Abbott Laboratories after a two-and-half-year legal battle over royalty payments for Humira, its treatment for rheumatoid arthritis. Shares in the drug developer rose smartly after a new complex licensing deal with Abbott was concluded.

In terms of the deal, CAT will receive from Abbott a payment of around $255m, which will be used to buy out CAT’s minority partners who helped develop Humira, reduced royalties and additional one-off payments over the next five years. Humira, an injectable drug, is expected to have sales of around $1.25bn this year and have peak sales of $2.5bn.

Shares in Axis-Shield, the in vitro diagnostics company, moved up a little after it announced the launch of its homocysteine test in Europe. Up to 47 per cent of patients with symptoms of cardiovascular disease show elevated levels of homocysteine. Dade Behring, the Nasdaq listed company, is selling and distributing the product under the Dade Behring name.

Ark Therapeutics share price was pushed significantly higher by news that it has applied for European approval for Cerepo, its novel gene-based brain cancer drug.

Positive phase I results for Ardana’s treatment for testosterone deficiency gave its share price a useful lift. The company has initiated phase II trials for its testosterone cream. It expects to launch the product by the end of 2007.