Surging stocks

Our weekly review of the pharmaceutical stock market

A sudden surge in the share prices of big pharmaceutical companies is helping to keep the London stock market close to its highest levels since May 2002 after its recent good run. The FTSE 100 Index remains above the important 5,000 mark.

Investor sentiment towards the heavily weighted pharmaceutical stocks received a major boost from US drugs regulator the Food and Drug Administration (FDA). The FDA's advisory panel decided to allow pharma groups to continue selling COX-2 inhibitors, a type of painkiller, with regulatory restrictions. This softer than expected stance on drug safety lifted big pharma groups' share prices worldwide.

Renewed merger and takeover activity on the global front also strengthened investor hopes of more deals to generate further consolidation within the industry. Over the past week alone plans have emerged for a proposed tie-up between Japan's Sankyo and Daiichi Pharmaceutical to create a giant group, while Novartis has created the world's largest generics drugmaker through the purchase of Hexal of Germany and US company Eon Labs.

On Monday, GlaxoSmithKline (GSK) led the way forward with a 4.4 per cent rise that nearly swept it through the £13 mark to hit a new twelve-month high. GSK's rise was closely followed by AstraZeneca and Shire Pharmaceuticals, with 3.4 per cent rises.

Sinclair secures Wal-Mart deal

Sinclair Pharma's announcement that its US partner Sunstar Butler, part of the Japanese Sunstar group, has secured a deal to distribute Aloclair, Sinclair's treatment for mouth ulcers, through the stores of giant retailing US group Wal-Mart sent its share price smartly higher. Last week Sinclair also finalised a deal with Sunstar Suisse to distribute Aloclair to another eight countries within Europe.

The deals are seen by Sinclair as important steps towards establishing Aloclair as a successful global brand. The global market for mouth ulcer treatment is estimated to be worth more than $1bn a year.

Antisoma figures unimpressive

Interim figures from biotech company Antisoma, which specialises in cancer drugs, were not well received by the market. The shares lost nearly 10 per cent of their value after pre-tax losses in the six months to end December jumped nearly four-fold to £2m compared to the previous year's interim losses. Reduced payments from Roche, the Swiss drugs group with which Antisoma has a strategic alliance, were the main cause of the dramatic widening of its losses.

Antisoma had net cash of £32.3m at end-December to help fund further development of its pipeline drugs. The company said it was looking forward to a series of major milestones in 2005 with important progress expected on all four of its products in clinical trials.

CAT faces Abbott appeal

The market heavily marked down shares in biotech company Cambridge Antibody Technology (CAT) on the news that Abbott Laboratories, the US healthcare group, is seeking permission to appeal against the High Court's ruling on royalty payments for Humira, an arthritis treatment. In December the court decided that CAT's share of revenues from Humira, a drug based on CAT's technology, should rise from 2 per cent to just over 5 per cent.

Proteome Sciences warning

Shares in Proteome Sciences, the Alternative Investment Market listed biotech company which uses proteins to develop tests for diseases, plunged after Evolution Securities analyst, Jonathan Senior, warned that the company could run out of cash by the middle of the year if it does not secure deals.

Proteome has not signed any deals since its August annual general meeting when it promised five deals within the year. Evolution has reduced its price target to 70p. The shares were last trading at 63p after losing more than 15 per cent, with Evolution suggesting that some form of fundraising could be on the cards.

Shares ease despite speculation

SkyePharma shares lost 6 per cent of their value despite recent takeover speculation surrounding the company. Share price weakness stemmed from the sale of a block of 15m shares by an unnamed institutional investor. Oxford Biomedica, the pharmaceutical group whose takeover talks with an unnamed group were terminated, also saw its share price subsequently ease after a bout of heavy trade in its shares.

However, ML Laboratories held steady after a major unnamed shareholder ditched a big parcel of shares in the pharmaceutical group. Market talk suggests that a board reshuffle is on the cards.

Ardana announces flotation plans

Ardana Biosciences, the Scottish-based biotechnology company, is the first UK biotech company this year to announce plans to float on the London stock market through an initial public offering. Several other biotech companies are thought to be heading for a stock market listing shortly.

Ardana is planning to list in March by raising around £25m, equal to around a quarter of its initial market capitalisation, at 153p per share. It plans to use the money to fund development of its product portfolio, which includes Teverelix, a treatment for prostate cancer and a gel to help treat infertility in women.