Up and up?

The market is struggling to move decisively upwards with the FTSE 100 index churning around the 4,900 level. Rumours of bid hedge fund losses have unsettled the market whereas lower oil prices and some encouraging US economic data boosted investor sentiment.

Encouragingly, equity strategists continue to favour the pharmaceutical sector, which enjoys the distinction of being the best performing sector so far this year. It has gained 12.4 per cent compared with the FTSE 100 index, up only 1.5 per cent.

Big pharmas
The two leading big pharma stocks are still performing well, keeping the sector in the top spot. GlaxoSmithKline is close to its 12 month high despite going ex-dividend recently. Meanwhile, AstraZeneca is testing a new high for this year, after gaining some good ground on news that an experimental dual-action drug, called ZD6474, has turned in some promising data in combating lung cancer from a mid-stage clinical trial.

Elan featured, gaining more than a fifth in value, as investors piled into the the Irish drug group's shares in the hope that its multiple sclerosis treatment, Tysabri, could return in the not too distant future to the market. Elan's share price was crushed after Tysabri was recently suspended after a couple of patients taking the drug developed a rare neurological disease.

Investors responded negatively to news that biotechnology group Cambridge Antibody Technology (CAT) has given up pursuing its goal, set in 2002, of achieving profitability by 2008 because it no longer believes that this goal is best for shareholders. Instead the focus has shifted to investing in developing drugs, based on human antibodies, over the next five years from its alliance with AstraZeneca.

New CAT plan
CAT is set to make huge royalties from Humira, an arthritis treatment that is a potential blockbuster, provided Abbott Laboratories, the US group, does not win an appeal against last year's High Court ruling. The ruling gave CAT higher royalties from Humira, which was developed with Abbott.

CAT also unveiled first half figures showing that losses narrowed significantly thanks to higher royalties received. The results were better than stockbroker Merrill Lynch's expectations, which were for widening losses.

After reporting a big jump in first quarter losses, vaccine maker Acambis saw its shares head south last week. Revenues were down because much of the work for a major contract was completed. It also announced that it was expanding its manufacturing capability through a $7.5m acquisition of a US based fill/finish facility.

According to chief executive Gordon Cameron we are now fully integrated for the first time with the capability to take a vaccine from concept to commercialisation, thanks to this acquisition.

Among the small cap stocks, biotech Alizyme was one of the best performers on the stock market last week, rising by a tenth in continued heavy trade ahead of the completion of its around £30m rights offer. The shares, however, were trading a little below the rights offer price of 100p each, leaving the underwriters to take up most of the new shares.

AIM
On the Alternative Investment Market (AIM), Allergy Therapeutics stole the limelight with its shares jumping by more than a fifth over the past week. The catalyst was news that it had received clearance in Canada to start studies into developing ragweed vaccines to fight ragweed pollen, the main airborne allergen in North America.

Shares in Phytopharm, a biotechnology company that specialises in developing medicines from plants, were unchanged after producing for the first time an interim profit. The company, however, expects to make a full year loss.

A £4m milestone payment came from Yamanouchi, its Japanese partner that terminated a regional licensing agreement for Cogane, an Alzheimer's treatment. Phytopharm is now seeking a new licensing deal for Cogane, which is undergoing phase II trials.

Activity could be hotting up on the new listings front. Indications are that ProStrakan, a Scottish biotech company, is seeking to raise around £65m through a public offer. Renovo, a Northern Irish group that is developing a new anti-scarring treatment, which is undergoing a book-building process, looks to be heading for the market.

Meanwhile, Intercytex, a firm is working on a treatment for baldness, hopes to raise around £15m through a floatation on AIM.