Market Report: GSK slides on fears over prospects for lung drug

Click to follow
The Independent Online

With the blue-chip index enduring its second major sell-off in a row, GlaxoSmithKline was left deep in the red as questions were raised over the chances of its major new lung drug gaining approval.

The pharmaceutical giant slipped back 25.5p to 1,281.5p after revealing the results of clinical studies on Relovair, which it hopes will replace its best selling product Advair. Although the majority of the targets were met, in one test GSK admitted that the drug did not show a "consistent statistical significance" when compared to one of its components on its own.

"It raises the regulatory risks," said Deutsche Bank's Mark Clark, who warned that regulatory bodies will need to be convinced that the combination found in Relovair produces a significant difference.

With longer-term studies still to be completed before approval is applied for, GSK described the results as "an important milestone", although Theravance – the US group which is a partner in the product – also saw its share price slump on the Nasdaq.

Overall, the FTSE 100 shed 80.69 points to finish at 5,847.92, meaning it has been knocked back over 140 points in the last two days, as the recent run of poor global economic data raised fears ahead of today's closely watched non-farm payroll figures from the US.

Speculation that Barclays could be looking to Spain for a potential acquisition knocked the bank back 3.95p to 265.7p after Evolution Securities said the prospect of it buying one of the country's savings banks, known as "cajas", was looking "increasingly likely". "We see the industrial logic, but also feel that such a deal might impact Barclays' risk perception among investors," said the broker's analyst Arturo De Frias Marques, who reiterating his "sell" advice.

Kingfisher's first-quarter trading update prompted a fall of 2.8p to 279.3p, despite the retailer seeing its like-for-like sales rise more than 3 per cent. Although the B&Q-owner said the recent good weather had given it a boost, it warned the rest of the year would be tough for the retailers in the UK, as Home Retail declined 4.7p to 209p and Debenhams was pegged back 1.05p to 71.55p.

Pole position on the top-tier index was taken by Serco, which put on 25p to 597.5p after Credit Suisse reiterated its "outperform" advice following the outsourcer's acquisition earlier in the week of the Indian group Intelenet.

CSR finished at the foot of the FTSE 250, sliding 13.7p to 337p on fears over the state of two of its handset business's biggest customers. Nokia shocked investors earlier in the week after warning its sales were set to be "substantially" lower, which subsequently knocked Research in Motion as analysts said the BlackBerry manufacturer was likely to face the same issues. As a result of the doom and gloom among the mobile phone manufacturers, Numis Securities' Nick James cut his advice to "add" from "buy" and slashed its price target by 190p to 600p, noting that Nokia is expected to provide up to 8 per cent of the group's revenue. "While CSR is not exposed to Nokia's severe issues in smartphones," said Mr James, "it is exposed to the challenges... Nokia is now seeing in feature phones."

In early trading it looked as if the CSR's fellow chip-maker ARM Holdings was going to follow it south as its peer touched a low of 547.5p. However, with Microsoft's new Windows 8 operating system – which uses the group's technology – impressing, it ended up just 0.5p behind at 571p.

After being pushed up 5 per cent on Wednesday, thanks to speculation it could be a bid target, investors in Tate & Lyle were happy to bank profits, leading the food ingredients group down 11.5p to 640p. Nonetheless, Credit Suisse said the takeover chatter "should not be dismissed out of hand", although its analysts did warn the group "could prove rather a large mouthful". Mutterings around Misys lifted the software group 3.9p to 371.9p as vague rumours continued to spread that a bid could be in the pipeline for its banking unit, and Jefferies was certainly positive on the idea, predicting its divisions will be "divested within a year or so".

WS Atkins slipped back 3.5p to 811p after announcing its chief executive Keith Clarke is to retire at the end of July, when he will be replaced by Dr Uwe Krueger.

Charles Stanley's Andy Smith was not particularly happy, saying the news was a surprise "given Atkins is still in the process of integrating its recent acquisition", and the analyst added that the timing raised questions, considering the engineer's final results are out within a fortnight.

The day's biggest faller was Noventa, which found its share price collapsed by more than 60 per cent on the Alternative Investment Market. The miner plummeted 105.38p to close at 66p after revealing that, not only was its Marropino plant in Mozambique missing its production targets, but that a shortfall meant the company required "urgent fundraising".

Comments