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Under pressure

GlaxoSmithKline faces selling pressure despite news that its antidepressant Paxil CR has gone back on sale in the US

Dollar notesThe stock market has hit a three-year high, with the FTSE 100 index closing above the 5,100 level, on the back of rising hopes that an interest rate cut would come as early as August.

However, a renewed surge in oil prices to record levels, breaking through to above $60 a barrel, quickly put the brakes on the stock market gaining further upward momentum. Investors became increasingly worried about the impact of higher energy prices on both economic growth and corporate profits.  

Leading pharma stocks have under-performed as the stock market retreated from its latest high-water mark. GlaxoSmithKline (GSK) benefited from a positive research note from Merrill Lynch before succumbing to some fairly sustained selling pressure. News that Paxil CR, its antidepressant, has gone back on sale in the US after problems at its Puerto Rico manufacturing plant appeared to make no impact on its share price.

Meanwhile, shareholders are looking forward to GSK's report on Thursday when it updates analysts about its pipeline of new drugs. Analysts are expecting to hear positive plans for around 20 late-stage vaccines, which are under development.


There was plenty of action and developments among the medium to small cap stocks in the pharmaceutical and biotech sector. Cambridge Antibody, a biotechnology company, saw its share price move higher after it said that early trials of a drug under development to treat asthma had raised no safety concerns. Moreover, CSFB said the company was an attractive bid candidate.

Elsewhere, Sinclair Pharma benefited from news of positive results from a trial of Atopiclair, an eczema cream, as well as the product's launch in the US.

Shares in drugmaker Phytopharm plunged to a new low, down by more than a fifth at one stage, after news emerged that Canaccord Capital resigned as its corporate broker after animal rights activists claimed responsibility for firebombing the car of a director of Canaccord. Activists said Canaccord was earmarked because of its client's links with Huntingdon Life Sciences (HLS), which has been a target of activists for undertaking drug tests on animals.

Phytopharm, which develops drugs from plants, said that it has no links with HLS.

Takeover target

John Mayo, the former finance director of Marconi, where billions of pounds of shareholders' value were destroyed, is leading a takeover for Xenova, a cash-strapped biotechnology company, which is developing vaccines for cocaine and nicotine addiction. Shares in Xenova were noticeably firmer on news of the takeover approach.

Mayo hopes to expand the investment fund Celtic Pharma, which plans to target small biotech companies such as Xenova that have promising drugs in late-stage development, to around $1bn.

News that Vectura is in advanced talks to license its new inhaler technology was well received. Recently, Vectura together with Arakis, a privately-owned company, signed a deal with Novartis that could be worth up to $375m, as well as royalties for their drug that treats chronic lung disease. Vectura confirmed it is in advanced discussions with several parties to license GyroHaler, a dry powder inhaler for treating respiratory diseases. 

Up and away

Among the AIM-listed pharmaceutical companies, Alliance Pharma saw its shares gain more than 15 per cent last week on news of two important developments. Firstly, it reported that sales growth in the first quarter was meeting expectations and was helping to improve gross margins. Secondly, Nigel Wray, a well-known investor in some quarters, has raised his stake in the company to 6.6 per cent equal to around 9.6 million shares after buying an additional 3.2 million shares.

On the new listing front, there was some good news with yet another

Scotland-based biotech, Stem Cell Sciences, looking to float its shares in the wake of this year's listings of Ardana and ProStrakan.

2nd September 2008


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