Market Report: Glaxo expectations spur pick-up in drug shares

ARE drug shares, in the doldrums since their halcyon days, at last on the mend? They were the best performers in a quiet, lacklustre stock market again dominated by interest-rate worries.

Glaxo led the charge. US buying, allegedly covering a short position, was one influence; another was the growing excitement about next month's figures, which the cash-rich group is likely to accompany with another big dividend increase.

The sudden display of strength filtered through the sector. There was talk of the takeover turbulence in the US drugs industry spreading to envelop possibly Wellcome and Zeneca. The arrival, at long last, of the Clinton health reforms before the Senate also helped sentiment.

But the day belonged to Glaxo, one of the top-performing shares of the past two decades. The shares rose 17p to 629p, a two-day gain of 24.5p. They have been as low as 520p this year. Their high, achieved in 1992, was 943p.

Profits are expected to emerge at about pounds 950m, although Glaxo will have to take a hit of up to pounds 100m on its bond portfolio. With pounds 2bn in the bank and its capital spending past its peak, the group is in a strong position to increase its dividend sharply .

British Bio-technology, which came to market two years ago, was another attracting attention. The shares rose 12p to 398p and the warrants, 50p on Monday, a further 15p to 88p. They can be switched into one share at 525p late next year or early in 1996.

The company is developing a cancer drug and there are hopes that the next progress report, probably next month, will be encouraging.

A pounds 1m deal signed by the Cancer Research Campaign with a company called Xenova to produce a cancer treatment also helped lift the shares.

The rest of the market adopted what is becoming its August routine - a gradual improvment after a weak start. At one point, the FT-SE 100 index was down 16.4 points. By the close, the fall had been reduced to 1.6 at 3,167, with a strong New York display providing the impetus.

Rolls-Royce, the aero engine group, was another helped by US interest. A buy recommendation from Smith New Court added fuel, leaving the shares 5p higher at 201p.

Drinks shares were in the limelight, with Hoare Govett urging a switch out of Bass into Whitbread and James Capel hanging a buy sign over Whitbread. The analytical ferment left Bass 7p lower at 563p and Whitbread up 11p at 543p. Allied-Lyons, after a meeting with Robert Fleming Securities, dipped 4p to 593p.

Albert Fisher, the food group, held at 50p. There is talk that it is about to start on a round of institutional meetings.

Acatos & Hutcheson, the edible oils group, gave up 7p to 323p. Word is that its mystery supporter, taking up a 22.5 per cent shareholding, is Archer- Daniels-Midland, the US group with 7.34 per cent of the Tate & Lyle sugar group. T&L was firm at 444p, with Barclays de Zoete Wedd said to be ugrading.

Electricities suffered jitters ahead of today's ruling by the regulator, Stephen Littlechild.

Oils were mixed as the Nigerian strike continued to erode West African supplies. British Petroleum gained 2.5p to 411p but Shell, expected to produce second-quarter figures of pounds 810m today, lost 6.5p to 730p.

Kingfisher enjoyed a late 10p run to 527p but Upton & Southern fell a further 2p to 12p.

Charter dipped 2p to 743p as its bid for Esab continued to irritate some Swedish institutions. It seems likely that to acquire full contol Charter will be forced into increasing its offer, with the Esab shares sticking doggedly above the offer price in Stockholm. Hanson, with figures out next week and favoured by SG Warburg, gained 3.25p to 266.75p.

Banks were unsettled by the Standard Chartered figures; HSBC, reporting next week, fell 16.5p to 778p.

London International Group slipped to 97p as FMR lifted its stake to 12.53 per cent, buying 11.8 million shares.

Mid-States, with car-part operations in the US, held at 90p as Second Consolidated Trust said it had sold 3.5 million shares and was left with 6.44 per cent.

Aromascan is expected to trade at about 105p - against the 100p sale price - when dealings start today.

And on the twilight 4.2 market, a company called Advanced Media, another multimedia business, will soon make its debut. The stockbroker SP Angel is placing 400,000 shares at 110p.

There is discreet interest in Bullers, the giftware group that moved into media services. The shares have been keenly traded recently; they rose 1.75p to 13.5p yesterday. The company's main claim to fame is a reconstruction that included a remarkable one- for-1,000 consolidation. The group, with acquisitions in the pipeline, should be back in profit after big losses.

Spring Ram Corporation, the bathroom and kitchen group teetering on the brink of disaster last year, is regaining City support. London Wall Equities, the stockbroker, believes the shares, unchanged at 48p, should be 60p. It looks for profits of pounds 8m this year and pounds 22.5m next. Last year, SRC lost pounds 36.4m. Before it ran into trouble, the shares were around 180p.