Time for a tumble

The deepening conflict between Israel and the Hezbollah movement - coming in the wake of market concerns about North Korean missile tests and Iran's nuclear ambitions - has added enormously to the geopolitical tension unnerving the markets. Investment sentiment, already fragile, was further undermined by record oil prices, while worries persist about higher inflation and interest rates rising further worldwide, markedly slowing global economic growth.

Leading pharma groups headed south fast, more or less in line with the market's sharp fall, which has taken the FTSE 100 index down more than 3 per cent to below the 5,700 over the past week. AstraZeneca's (AZ) descent was accelerated by JP Morgan's expectation that the recent strong growth in sales of Crestor, its cholesterol drug, will lose momentum. Also takeover talk has died down for the time being, adding downward pressure on the stock.

Meanwhile, GlaxoSmithKline (GSK) dropped through the key 1500p support level even though it received approval from the US Food and Drug Administration (FDA) for Avandamet, its treatment for type 2 diabetes.

Hikma was noticeably softer despite a trading statement from the Algerian-based multinational pharmaceuticals group that it would deliver strong growth for the year. Middle East developments hurt investment sentiment towards the stock as did confirmation that, as anticipated by the group, the new Algerian reference pricing regime has impacted adversely on first half sales in the country. But this was mostly offset by strong sales in other markets.

Hikma, however, is confident that it can deliver growth in Algeria on a full year basis. New product launches and increased sales in both new and existing markets are expected by the group to accelerate growth in its branded business in the second half of this year. Substantial growth in the US, Europe and the Middle East by its injectables business is also expected to be maintained throughout this year.

Perhaps a touch surprisingly, given that investors have become more risk averse and are tending to favour big cap stocks rather than small cap stocks, the share prices of a number of small caps moved ahead despite poor stock market conditions.

Shares in ProStrakan, the specialty pharmaceutical group, enjoyed a useful rise after it announced that it had struck a licence and collaboration agreement with Amgen, the US-based giant biotech group, that could be worth upwards of $150m. Amgen is paying a worldwide licence to develop and commercialise ProStrakan's pre-clinical compounds for renal disease. Amgen is providing research collaboration funding of $1.1m for the first year.

ProStrakan has also announced that it will raise around ?11m through a placing to raise further working capital. The company said that its sales in the first six months of this year were in line with expectations and that it has a cash mountain of at least $19m.

Acambis moved higher on the announcement that Peter Fellner, well-regarded in the biotech industry, is to become non-executive chairman of the vaccines group. He was previously a non-executive director. The shares also benefited from a positive interpretation by the market of case transcripts of its patent dispute with Bavarian Nordic over its smallpox vaccine.

Sinclair Pharma, the specialty pharmaceutical company, continued to make good progress in the wake of its recent US licensing deal with Johnson & Johnson, the US drugs group, for its lead product Decapinol, a mouthwash treatment for gum disease. No financial details were divulged but sales are expected to begin within the next 12 months. Annual sales in the expanding US oral rinse market are estimated to exceed $600m with around 80 per cent of the adult population estimated to have some degree of gum inflammation.

Elsewhere, Allergy Therapeutics lost some ground after the specialist pharmaceuticals group said in a trading update statement that its sales would meet market expectations and that it was happy with the progress made in clinical trials, particularly that of lead product, Pollinex Quattro, a four-shot vaccination for allergy sufferers. Allergy maintained that it had sufficient financial resources to continue its development programme independently but that it was exploring options for securing a partner from a position of strength.

On the new listings front, there were reports that Mayne Pharma, one of the biggest Australian pharma groups, is thinking about listing on the London Stock Exchange. Mayne, which focuses on cancer treatments, generates more than two-thirds of its revenues in North European markets, and a couple of months ago moved its corporate office to London. It is already listed on the Australian stock market.

Recently listed Chi-Med, which specialises in traditional Chinese medicines, suffered a sharp fall because of adverse news to trade even further below their May flotation price of 275p. The group acknowledged that sales from a joint venture in China would be hit by two recent policy shifts by the Chinese regulatory authorities.