The Investment Column: Hold on for a lift from AstraZeneca

Ted's on form, but the shares are high enough; Manganese Bronze has failed to polish up its act
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The Independent Online

A bit like the bumble bee, AstraZeneca shouldn't really have kept flying - but it has.

A bit like the bumble bee, AstraZeneca shouldn't really have kept flying - but it has.

When it was created in 1999 from an Anglo-Swedish merger, the drug giant was staring at the imminent loss of revenue from what was then the world's best selling drug, Losec, an ulcer pill with sales of £10m a day.

Well, the company kept Losec's copycat rivals tied up in the patent courts long enough to switch patients to a better version of the drug. That replacement, Nexium, is batting away all the competitive threats to this day. Meanwhile, AstraZeneca has launched blockbuster after blockbuster and now has an impressive portfolio of drugs with plenty of growth in them.

There have been disappointments. Crestor, an anti-cholesterol pill, probably won't meet its target of snatching 20 per cent of the global market for this type of drug. Its potential side effects have been too publicly highlighted. It is going to take years to establish the safety of Exanta, a revolutionary blood thinning drug whose launch was blocked by a US regulatory panel. The next big launch, of Galida for diabetes, is a year further away than hoped.

But sleeping giants are waking. Seroquel, for manic depression and schizophrenia, is establishing itself as a powerful tool for psychiatrists. Symbicort might be a serious player in the competitive asthma market. And AstraZeneca looks like it may have one of the most impressive portfolios of cancer drugs for the next decade.

The shares dipped yesterday when Sir Tom McKillop, the chief executive, set out some home truths: public trust in the industry is so low and healthcare costs so high that it is doomed to lose the coming battles over drug prices. In the US, the most lucrative drug market, prices will inevitably fall, so painful cuts will have to be made to keep operating profits growing.

AstraZeneca shares are not a buy while these political issues play out. We said "sell" a year ago at 2,630p, and several product setbacks we feared then have turned out true. Now, the risks are more evenly balanced.

Hold.

Ted's on form, but the shares are high enough

While your average retailer spent the summer sweating about poor sales, Ted spent it chilling out in Canada, fishing. That's Ted, of Ted Baker, the illusory figurehead of the far from average retailer.

Ted's spokesman, aka Ray Kelvin, the company's founder and boss, said he'd been able to go and take it easy, leading the leisurely life of a lumberjack for a vacation, because the group's sales had forged ahead.

The company likes to think of itself more as a "lifestyle" brand than mere clothing retailer. Yesterday it showed what sets it apart from some of its high street peers by reporting a 26 per cent rise in interim profits before tax of £5.84m. It beat expectations thanks to a strong performance from each of its three profit streams: its retail estate, its wholesale activities and its licensing arm.

Ted is expanding his retail footprint across the UK and in the US, where he has proved a hit with the ladies. Space growth of 12 per cent, which included new stores in Covent Garden and Westbourne Grove in London, and San Francisco in the US, provided sales growth of 20 per cent during the first half.

Ted has a big City fan club, and with results like these you can see why. This column is a long-term Ted aficionado, but at 424p, up 6.5p, the shares are more of a hold than a buy.

Manganese Bronze has failed to polish up its act

Manganese Bronze, the black cab manufacturer, has had a tough few years. Having failed to make a profit since 2000, the best news it could muster for its shareholders yesterday was that its 2004 losses were substantially less than last year. Unfortunately, however, even this improvement was mostly accounted for by the one-off sale of one of its London properties.

Ian Pickering, the chief executive, did his best to put a positive spin on another worrying set of numbers. But whichever way you dress things up, the short-term outlook for Manganese does not look too rosy.

While the biggest driver of its losses continues to be Zingo - its fledgling mobile phone cab-hailing service, which locates its customers using Global Positioning Satellite technology - the group has also been thoroughly unimpressive in its core taxi manufacturing division. Although it managed to generate operating profits of about £4.3m through its taxi sales in its full year to 31 July, this is a reduction on last year. In fact, the only division which saw any material growth in 2004 was the company's export business, which more than tripled.

For Manganese to even turn a profit next year, the group now needs to halve its losses at Zingo. But with so many Zingo customers having been left cab-less due to the small size of its fleet, it may have an enormous job to win back the support it needs.

While there is a solid business somewhere inside the current muddle that is Manganese, the company is in need of a serious shake-up if it is going to return to profit, let alone provide steady growth for its shareholders. Things look like they may get much worse before they get better. Sell.

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