Market Report: Second dose of bad news makes Shire feel unwell

 

For the second time in a matter of weeks, disappointing news on one of its drugs left Shire feeling rather poorly. Having withdrawn its US regulatory application for its Fabry disease drug Replagal earlier in the month, the pharmaceutical giant closed at the foot of the benchmark index after admitting its bowel medicine Lialda had failed a clinical study.

Shire had hoped the drug, which is already used to treat ulcerative colitis, could also find a market among diverticulitis sufferers. Yet it has now had to give up on this notion after a study showed it was no more effective than a placebo, prompting the group to say it would not file for approval for this use.

The announcement was taken badly in the Square Mile as Shire's share price was knocked back 98p to 2,020p – its lowest for four months, although the reaction of City scribblers was rather more mixed.

Goldman Sachs' analysts – who had estimated the new use of the drug could result in up to $500m (£310m) of annual sales – called the news "disappointing", although they still kept their "buy" recommendation, while UBS said it had assumed only a 10 per cent chance of success anyway.

Traders noted some in the City were claiming it was a buying opportunity, pointing out the takeover speculation that frequently surrounds Shire.

Overall, it was a session for the bargain hunters as the FTSE 100, which had dropped more than 160 points during the previous three days, enjoyed a modest bounce up of 26.42 points to 5,768.45.

The heavyweight miners were managing to recover some of their recent losses ahead of the release over the weekend of key manufacturing data from China. Antofagasta ended up 30p better off at 1,152p, while Anglo American and Rio Tinto climbed 40.5p to 2,337p and 70.5p to 3,446p respectively.

Positive broker support meant Petrofac closed at the top of the Footsie, advancing 83p to 1,740p after Bank of America said the group was its favourite among the European oil services sector and Goldman Sachs upgraded its advice to "buy".

Tesco's share price may have shed over 14 per cent since January's shock profit warning, but that did not stop Morgan Stanley's Edouard Aubin downgrading his rating to "underweight". The analyst claimed there was "more downside to Tesco's UK profits", saying the grocer – which edged up 1.9p to 330p – had "significantly 'disinvested' from its UK customer proposition since 2007".

The answer, Mr Aubin argued, would be a full re-set including continued investment in prices, but he added that the company "does not appear ready to bite the bullet".

Vodafone retreated 2.25p to 172.2p following the telecoms giant's announcement that it was mulling over what action to take regarding India's proposed retrospective tax on overseas transactions, which would apply to its 2007 purchase of Hutchison Whampoa's Indian mobile operations.

Meanwhile, International Power stayed steady at 405p, with the power station operator still well above the 390p a pop approach from GDF Suez for the 30 per cent of the company it does not already hold. Berenberg's Robert Chantry added his voice to those putting pressure on the French firm to fork out more, arguing there was "potential for at least a moderate increase in the offer price, potentially above about 420p a share".

Down on the FTSE 250, Qinetiq shot up 9.6p to 159.3p after the hi-tech defence firm revealed the Government had decided to give up its veto over "any transaction or activity". The group has been the subject of bid speculation before, and Investec said it lifted a "small barrier to takeover, although the main impediments, golden share and material shareholder thresholds, remain in place".

There was no let-up for FirstGroup. Having slumped over 14 per cent on Thursday after admitting that margins at its UK bus unit would be well under market forecasts, the transport firm reversed another 9.7p to 237.7p as UBS slashed its target price to 250p.

Spirent Communications shrugged off fears it may be knocked by the woes of BlackBerry-maker RIM, a major customer of the telecoms equipment firm, to move up 1.3p to 160.5p. Panmure Gordon's George O'Connor said that while its share price "may get caught up in the RIM backdraft", he remained a buyer of the group.

A successful first day of dealings saw Rare Earths Global close at 340p on AIM, a big move up from the Chinese mineral supplier's float price of 247p a pop.

Elsewhere, Ithaca Energy ticked up 10.75p to 201.25p as vague speculation that a deal may be close continued to swirl around the explorer, which announced earlier in the week it was still in takeover talks.

Independent Comment
blog comments powered by Disqus
Career Services

Day In a Page

The 50 Best beachwear

The 50 Best beachwear

The hottest summer gear for men and women
Still standing: George Galloway reveals why his staunchly Leftist outlook is still invariably right

Still standing: George Galloway

Written off, ridiculed, wrongly accused of taking bribes the honourable member for Bradford West, has never bowed to the critics.
How will Daniel Radcliffe's fans react to his latest turn - as a damaged, drug-taking Beatnik poet?

Daniel Radcliffe as drug-taking Beatnik poet

His decade as the boy wizard may be over, but that hasn't hexed Daniel Radcliffe's enchanted life.
For whom the bell tolls: £20m 'Memo' project takes shape on Dorset's Jurassic coast

'Memo' project takes shape on Dorset coast

It started as a stonemason's visionary idea – to commemorate all the species that have ever existed and are now extinct.
Just add sunshine: Bill Granger's Turkish delights

Just add sunshine: Bill Granger's Turkish delights

Turkish cuisine is perfect for those long, sociable weekend meals with friends. It's just a shame that money can't buy the key ingredient.
Objets czar: David Usborne’s collection of myriad objects is quite the mystery

Objets czar: David Usborne’s collection of myriad objects

To others, they're junk. To David Usborne, they are his life: useful gizmos, mysterious thingamajigs and anonymous articles that dominate his home.
The iron ore lady: Why the world's richest woman is mired in controversy

World's richest woman: Gina Rinehart

Family feuds, attempts to control the Australian media and bitter public disputes are keeping the mining magnate in the headlines.
We just click: How Lego keeps building on its success

How Lego keeps building on its success

This year, Lego announced record profits. Gerard Gilbert visits its Denmark HQ.
The other bits: Mark Hix creates delicious and economical meals with cheaper cuts of meat

Mark Hix cooks with cheaper cuts of meat

Our chef creates delicious and economical meals on a budget
Strokes of genius: How to create summer's bold make-up look

Strokes of genius: Summer's bold make-up

From coral lips to fly-away fringes, make-up artist Kim Brown and hair stylist Richard Scorer reveal how to create the look
Marking his territory: Kilian Hennessy creates fragrances designed to provoke the senses

Marking his territory: Kilian Hennessy

The perfumer creates fragrances designed to provoke the senses
Photo essay: Britain's 1948 Olympians today

Britain's 1948 Olympians today

Photo essay
The top five E3 2012 triumphs: From Ubisoft's suite of titles to Dishonored and The Last of Us

The top five E3 2012 triumphs

The games and moments that left us grinning like the Cheshire Cat
The green movement at 50: Can the world be saved?

Can the world be saved?

Population growth and climate change are the big problems facing the earth in the next 50 years. But are there any solutions?
France: Will xenophobia go mainstream?

France: Will xenophobia go mainstream?

In the beautiful Rhone delta, John Lichfield visits a village where a dangerous new political landscape is taking shape