Market Report: Dealers dump AstraZeneca as bid hopes fade

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The Independent Online

Dresdner Kleinwort Wasserstein has called time on the soaraway share-price gains registered by AstraZeneca over the past six months.

The German broker's advice to investors yesterday was simple - it urged them to abandon AZ, which has seen its value rise 20 per cent since last summer. The warningshoved shares in the drug giant down 40p to 2,815p.

Bid speculation has been the main driver of the stock's outperformance, according to Dresdner. But the broker is sceptical that such an event will come to pass in the near future. "Market rumours continue about GlaxoSmithKline making a bid for AZ, however, we rate the changes of this happening at less than 50 per cent," the broker said as it slapped a "sell" rating on AZ.

In the near term, Dresdner sees upgrades to the group's earnings forecasts as a possibility, but it urged investors to use any subsequent jump in the shares as an exit point. On a longer-term view, it expects AZ's key drugs - Nexium, an ulcer treatment, and the cholesterol-lowering Crestor - to be negatively impacted by competition from generic producers.

Meanwhile, Dresdner urged investors to move into GlaxoSmithKline, off 1p at 1,456p. It expects the group's diabetes drug, Avandia, and Advair, its asthma treatment, to drive earnings growththis year.

Shire Pharmaceuticals was the worst performer in the pharma sector and the FTSE 100 after Merrill Lynch downgraded its stock to "hold" from "buy". On Thursday, Shire was set alight by rumours suggesting it was close to settling patent disputes with the rival drug makers Barr Laboratories and Impax. But yesterday Merrill suggested that such an outcome is already reflected in the company's valuation.

The FTSE 100 finished the week on a negative note, losing 24.1 points to 5,711. Similarly, the FTSE 250 registered a retreat, falling 17.4 to 8,921.5. JP Morgan did ITV, 2.25p lower to 112.75p, no favours. It described the broadcaster's recent move into the online sector as an "expensive shift into uncharted territory". It also warned that ITV could find it tough to break into the lucrative online classified-advertising market, and downgraded its shares to "neutral" from "overweight".

Hopes of a bid for International Power pushed its shares 5.75p higher to 257.75p. Gossips talked of a possible move on the company by a US energy player. ABN Amro agreed that International Power is vulnerable to takeover, while Williams de Broë tipped the company to be a strong performer in the coming months, thanks to its strong earnings growth potential.

The telecoms sector had another bad day. BT Group dropped 5.25p to 215.25p, Cable & Wireless retreated 1.25p to 122.5p, and Colt Telecom lost 0.25p to 56p. Bear Stearns painted a bleak picture of the future for the European fixed-line telecoms industry. It warned that investors should expect pedestrian sales growth and declining profits margins during the next few years. Meanwhile, EMI ticked 3.5p higher to 245.5p as fresh bid rumours supported the music group. Traditionally, Warner Music is viewed as the most likely buyer of EMI, but recently Apple has also been tipped as a possible suitor.

Lok'nStore, 0.5p higher at 160.5p, disclosed the sale of 100,00 shares at 160p by Simon Thomas, the chairman of the self-storage company. Elsewhere, European Nickel added 4.25p to 32.25p after Simon Purkiss, its managing director, bought 75,000 shares at 28p, taking his total holding to 11.9 million, or 10.1 per cent. Plethora Solutions jumped 13p to 251.5p as the biotech unveiled two acquisitions in the urology arena, valued at £5.4m in total. Plethora plans to finance the acquisitions through an equity fundraising, to be put together by Collins Stewart. Crucially, the deals give the group a US sales force through which it can market its drugs, which include a treatment for erectile dysfunction.

Numis Corp added 4.5p to 297.5p after Michael Spencer, the chairman of the stockbroker, announced the purchase of 120,000 shares at 292.75p through IPGL Limited, a company which he and his wife control. Mr Spencer owns 10.2 per cent of Numis through the private firm. Meanwhile, dealers reported rumours that a merger between Numis and a fellow stockbroker, Panmure Gordon, off 2p to 226.5p, could be on the cards.

Imperial Energy soared 57.5p to 567.5p as the explorer boasted of an oil find at its site in Western Siberia. Imperial believes it has significant commercial potential, and this prompted its broker, ABN Amro, to slap a 910p price target on the stock.

Finally, Empyrean Energy ticked 3p better to 54p after it started drilling at its Eagle Oil project in California. Investors can expect an update from the firm's German gas project in the near future.