Skyepharma WAS back on trader buy lists yesterday as they took the view that the 12 per cent slide in the group's share price on Friday had been overdone. The collapse was prompted by news that distribution of GlaxoSmithKline's antidepressant, Paxil CR, from which Skye gets royalty payments, had been halted by the US Food & Drug Administration because of manufacturing problems associated with it.
Although the news is clearly a setback for Skye, analysts believe it will at worst cause an 11 per cent drop in sales at the group this year. Credit Suisse First Boston was among those arguing that Friday's share price fall was an "overreaction" by the market. "Importantly the withdrawal of Paxil CR is not in any way related to Skye's geomatrix technology but rather to GlaxoSmithKline's own unique manufacture process", the Swiss broker assured investors. This means that Skye's other products based on geomatrix technology are totally safe and that the group is not liable for any damage that this may have caused to patients.
Most analysts in the Square Mile take the view that the manufacturing problem at GSK will soon be solved and predict that Paxil will be back on the market at the start of next year. Skye finished the day as the best performer in the FTSE 250, up 3.25p to 55.25p. But GlaxoSmithKline was not so lucky, losing a further 16p to 1,273p. Morgan Stanley did not help matters by suggesting the manufacturing problems at GSK "are potentially quite serious" and urging investors to switch out of the stock and into its rivals Novartis of Switzerland and the French group Sanofi-Aventis.
In the FTSE 100, which dropped 9 points to 5,027.2, Reuters was a strong performer, gaining 6.25p to 422.75p, after suggestions by Lehman Brothers that the information provider has the capacity to return up to £1bn to its shareholders. The US broker, which repeated its "overweight" stance and 500p price target on Reuters, takes the view that now that the company's Fast Forward restructuring programme its coming to an end, it will focus on increasing its sales.
ITV improved 0.5p to 120.75p as some in the City predicted that the broadcaster's annual results tomorrow are likely to herald an increase in dividend of between 10 and 15 per cent. However, there was some disappointing news on the viewing figures front. Barb, a market research firm, reported that the broadcaster had suffered a 10 per cent drop in viewers during January and February. It also found that ITV had experienced 23 per cent fall in viewers in the key 16- to 24-year-old age group during the first two months of this year.
Vedanta Resources improved 8.75p to 505p on the back of an upgrade to "buy" from "hold" at Deutsche Bank. The German broker is particularly excited about Vedanta's exposure to the zinc price which it believes will continue to soar in 2005 as a result of global shortages. RAB Capital rose 3.75p to 65.75p before the hedge fund manager's results later this month. Last year is believed to have been a great one for RAB's various funds. Its Special Situations Fund recorded a 50 per cent jump in value last year and is already up by 20 per cent this year.
Multi Group, the cash shell in which the serial entrepreneur Bob Morton has a 51 per cent stake, rose 1p to 4.25p after acquiring Berry Recruitment for £525,000. Multi intends to focus on the recruitment and staffing industry and hopes to be a player in the consolidation of the sector. After the deal its completed, it will still have £4m in cash for further acquisitions.
Easyscreen ticked 0.75p higher to 14.75p amid vague whispers that the financial software provider could soon find itself on the receiving end of a takeover bid from a larger rival. That would certainly be good news for the company's long-suffering shareholders. In the past 12 months Easyscreen shares have more than halved. However, those betting on a bid for the group are playing a high-risk game. In December, Easyscreen posted widening second-quarter losses, and trading at the company is said to have improved little since then.
The stamp dealer Stanley Gibbons rose 3.5p to 102.5p despite the sale of 1 million shares at 101p by Paul Fraser, the chairman. After the disposal he retains a stake of 2.2 million shares or 9.1 per cent. WSP improved 10.5p to 260.5p after reporting a 71 per cent surge in pre-tax profits to £9.6m and boasting that its order book now stands at more than £500m.
Datamonitor was steady at 158.5p despite the sale of 440,000 shares at 158.5p by Andrew Gilchrist, its finance director. Shares in the information provider have risen by nearly 40 per cent over the past four months.