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Take off

Pharma shares are taking off as the stockmarket fell back on profit taking after breaking through the 6,000 barrier as measured by the FT-SE 100 Index

Pharma shares are taking off as the stockmarket fell back on profit taking after breaking through the 6,000 barrier as measured by the FT-SE 100 Index, its highest level since May 2001. With the market being driven onwards and upwards by the high level of new bids, the FTSE 250 index, which measures the performance of smaller companies, moved to fresh highs. Most City pundits agree the stockmarket should hit the Footsie 100 level of 7,000 by the end of 2007. If so, it would break the all time record of 6,930 set on the last trading day of 1999.

Pharmaceutical stocks take off as defensive attractions grow
Pharmaceutical shares have taken off in recent months - mainly due to cautious investors taking their profits from more speculative sectors and investing them in so-called `defensive' pharma stocks because the pharmaceutical sector is non-cyclical and there is always a solid demand for drugs, vaccines and medicines. In addition, there has been a stream of news from companies with drugs in the pipeline, allied with bid speculation. Speculation was buttressed by reality, with Merck making a Ä14.6 bn hostile bid for rival Schering - a bid speedily rejected - and by speculation on other mega-bid target possibilities. The pharma sector is on course to continue performing strongly during 2006.

AstraZeneca files lawsuit against IVAX over Nexium
AstraZeneca's shares blipped upwards after it announced it had filed a lawsuit for patent infringement against IVAX for its heartburn drug, Nexium. Takeover speculation continues to boost AZ's share price, with the market's guesstimate that AZ could be in the takeover sights of Novartis or Schering, with a possible bid price of £40 a share.

A bid from Novartis would mean that chief executive Daniel Vasella has had a complete change of mind since January when he reassured the market that a large transaction looked unlikely.

GSK's Cervarix goes to European regulators
GlaxoSmithKline's (GSK) shares rose after submitting its cervical cancer vaccine Cervarix to European regulators for approval. GSK hopes to have Cervarix on the market in 2007. Merck has also registered its own cancer vaccine Gardasil with the US regulators; GSK is planning to register Cervarix in the US later this year. The market for cervical cancer drugs is worth £2.3 billion worldwide. Cervical cancer is the second biggest type of cancer in women.

TeGenero's trial drug TGN1412 hits the headlines
The small German pharmaceutical company TeGenero shot into the headlines as a result of trials on a new drug TGN1412 which it was developing as a treatment for immunological diseases such as rheumatoid arthritis, certain cancers including leukaemia, and multiple sclerosis. The disastrous trial on healthy young men left two volunteers critically ill and four seriously ill. TGN1412 is a monoclonal antibody therapy and has been in development since 1997. In March 2005, the European Medicines Agency awarded TGN 1412 `orphan medical status' for potential use against rare, life-threatening diseases for which no sufficiently effective treatment exists.

The Medicines and Healthcare products Regulatory Agency (MHRA) suspended the drug trial and began an immediate investigation.

Simon Sturge, chief executive of Vernalis, said it was inevitable there would be an adverse impact on people's willingness to volunteer for phase I human trials. There is speculation that the MHRA might have to rethink the process by which drugs are allowed to progress from animal trials to phase I human trials.

Intercytex aims to conquer ageing
Intercytex, the cell therapy specialist, posted a loss of £7.24m for the year to end December 2005 - 43 per cent up on the loss of £5.06m in the previous year. Turnover was zero.

Intercytex uses the body's own repair mechanisms to slow down ageing. The anti-wrinkle product is ICX-RHY and results of Phase I and II trials are due this year. Intercytex uses human cells recovered after baby circumcision (primarily in the USA) to develop drugs for wrinkles, male baldness and foot ulcers. The market is huge - $4bn in the US alone for facial treatments and $800m for hair transplants. Intercytex has a skin replacement product for burns, and is aiming for this to replace skin grafts. The company has enough cash - £19.5m - for two years.

Acambis boosting research spending to £45m
Acambis, the smallpox vaccine developer, delivered a pre-tax loss of £27.7m for the year to end December 2005 against a profit of £27m in 2004. Sales were down 52 per cent at £40.9m. Acambis is boosting research spending in 2006 from £30m to £45m. Apart from its smallpox vaccine (ACAM2000), Acambis is developing a vaccine against the hospital superbug Clostridium difficile, which is starting phase II trials. It is also developing a later stage drug for Japanese encephalitis.

Broker Evolution Securities expects losses of £23.5m for 2006 .

Advanced Medical wins rising sales for woundcare range
Advanced Medical Solutions, the woundcare company, has delivered its first profit - £30,000 for the year to end December 2005 against a loss of £990,000 in the previous year. Turnover rose 17 per cent to £12.9m. Profits stem from rising sales, with woundcare sales ahead by 18 per cent to £10.5m in 2005, with gross profit margins up from 37 per cent to 40 per cent. Advanced Medical is offering a slashed-price woundcare range, branded ActivHeal, which is being sold into NHS Trusts seeking to cut costs. The company is seeking to expand sales into the US and the Far East.

Broker Bridgewell Securities expects current year profits of £380,000.

Medical Solutions - losses sharply down
Medical Solutions, the cancer diagnosis and pathology company, delivered a pre tax loss of £1.84m for the year to end December 2005 against a loss of £8.71m in the previous year. Turnover was up 77 per cent at £10.7m. The company has slashed operating expenses in half, not counting restructuring costs, but is still loss-making; although losses are sharply down and the company has £2.3 million in cash behind it.

Malcolm Craig is the author of 14 books on aspects of investment ranging from gilts to gold, from the stockmarket to overseas property. He is recognised as one of the country's leading investment commentators.

2nd September 2008


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