Market Report: SkyePharma under the spotlight as big guns line up to bid for drugs group

DEALERS WERE addicted to the drug group SkyePharma yesterday as rumours of a tie-up with a large pharmaceutical group circulated.

The stock has seen large volumes over the past few days as knowledgeable buyers positioned themselves ahead of the rumoured big deal. This mini- buying spree has propelled the shares 17 per cent higher from last month's all-time low of 44.5p. Yesterday, the drug delivery company was up 0.25p to 52.75p but punters whispered that an agreement is near. According to the Square Mile's rumour mill, SkyePharma, headed by the well-known industry figure Ian Gowrie-Smith is close to clinching a major collaboration with a blue-chip partner.

The names in the frame include the UK giant SmithKline Beecham, up 23.5p to 760p, Swiss rival Novartis and French group Synthelabo. The financial upside of the deal could be considerable and the partner could even take a stake in SkyePharma. The company, which specialises in new deliveries of existing drugs, is likely to receive royalties on the sales of the drugs as well as intermediate payments as the compounds are developed.

The bear story of the day came from Kingfisher, 15p lower to 691.5p. The B&Q-to-Woolworths retail powerhouse missed out on a 110-point-plus rally in the FTSE 100 as rumours of poor trading did the rounds. Some brokers fear Kingfisher's interims in September will show depressed sales in some operations. Revived stories of a bid for Safeway, up 1p to 230p, and fears of a Wal-Mart price offensive also depressed Kingfisher.

The FTSE 100 recovered from Thursday's 179-point tumble with a 114.4 rise to 6231.9 despite a weak Wall Street and strong domestic GDP numbers.However, the rebound was not enough to calm traders' nerves. Some said the jump could be a dead cat bounce and braced themselves for further volatility in the days ahead. Merrill Lynch added to the jittery feeling when it said that its global portfolio allocation is now overweight in cash because equities can surprise on the downside.

The undercard hitched a ride on the blue-chip bandwagon, with the midcap ending 21.9 better at 5969.5 and the Small Cap finishing just 1 point higher at 2716.6. The heavyweight oils and banks played a big part in the FTSE 100's renaissance. Shell, up 26.75p to 503.5p ahead of next week's interims, and BP Amoco, 31p higher to 1207p, were buoyed by a surge in Brent to a 20-month high. Oil explorer Lasmo also benefited, rising, 6.25p to 166.5p while rival Enterprise Oil, 23p higher to 474p, had the added boost of speculation of a bid from Italian giant ENI.

Banks were blessed by Lloyds TSB results. The black-horse bank beat market expectations and surged 10.5p to 802p. Rivals Barclays, 72p better to 1823p, NatWest, up 46p to 1219p and HSBC, 28p higher at 738.5p, are tipped to emulate Lloyds in next week's interims. Lloyds could now look for acquisitions and Norwich Union, up 2.25p to 402.5p, is still believed to be on its list. Rival insurer Prudential soared 53.5p to 919p as Warburg said "buy" after recent figures.

Computer group Misys recovered after Thursday's Nasdaq-inspired plunge and closed 35.5p to 547p. A CSFB push and whispers of an acquisitions also helped.

United News & Media firmed 29.5p to 675p on whispers that next week's results could herald the sale of its Express newspapers or a reorganisation of its TV activities.

Among the losers, Railtrack was shunted into the sidings, losing 41p to 1134p after the regulator denied the company more time to reduce delays. The ruling is good news for Jarvis, 26.5p higher at 284p, as more rail maintenance contracts will come its way. Jarvis bulls also said the group could win a pounds 350m upgrade of the West Coast Main Line and is close to resolving a contract dispute with Railtrack.

Leisure group Rank jumped 22.5p to 303p amid talk of a sale of its Odeon cinemas and returning whispers of a break-up bid. Reflective ink-maker Reflec splashed 0.75p higher to 4.12p on optimism about contracts with Adidas and Puma and rumours of a huge contract win.Building materials group Tarmac started life as a demerged entity with a 29.25p rise to 554.5p, while its construction spin-off Carillion climbed 3.5p to 109.5p.

Airport tiddler Wiggins firmed 2.5p to 20p in large volume. It is close to getting the go-ahead for its Manston airport in Kent and is rumoured to have clinched a property deal with developer MEPC, down 8p to 510p.

Aortech International soared 29.5p to 128.5p after confirming a deal for its skin-making division and announcing the launch of a continuous heart monitoring kit. On Monday the company said it knew of no reason for a spike in its share price.

SEAQ VOLUME: 1.07bn

SEAQ TRADES: 75,363

GILTS INDEX: N/A

IF THE WHISPERS are to be believed, ENIC will soon offer betting couch-potatoes the chance to place a bet from the comfort of their sofas.

The leisure group, up 9.5p to 116.5p, is believed to be looking at acquiring the bookmaker Victor Chandler, where it has a minority stake. The next step is rumoured to be a revenue-sharing agreement with Sky Digital which would enable viewers to place bets through their remote control.

THE WEB frenzy continues unabated. After the float of Freeserve, here comes netvest.com, a company which aims to invest in small Internet business. The group plans to float on the Alternative Investment Markey on Friday with a capitalisation of some pounds 1.1m. netvest.com, run by Andrew Balcombe, the founder of the Internet dating agency Matchnet, is also raising some pounds 800,000. It is already looking at three or four potential investments in the e-commerce area.

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