Market Report: Shire under the weather as rival hits recovery trail

 

There was a rather pale look to Shire last night as the drugs maker weakened after one of its major rivals took a big step towards recovery. For a number of years now, Shire has been benefiting from serious supply issues suffered by Genzyne, but yesterday the biotech firm appeared to turn a corner.

The group, which was snapped up by French giant Sanofi last year for more than $20bn (£13bn), was forced to shut one of its plants temporarily in 2009 after a viral contamination. Ever since, a number of its products have been hit by shortages, including its Fabrazyme drug which is used to treat Fabry disease.

As a result, Shire's alternative treatment Replagal has seen its sales boom. The product held just a 45 per cent share of the market outside the US in 2008, but this has now shot up to more than 80 per cent.

However, this advantage looks to be coming to an end after Genzyne announced yesterday that its new factory in the US has been given the green light by the European Medicines Agency. Once opened, the plant should be a major step towards ending its manufacturing woes, and Panmure Gordon's Savvas Neophytou warned the approval was likely to cause "significant headwinds" for Shire.

Pointing out that Replagal contributes more than 12 per cent of the company's profits, the analyst reiterated his "sell" advice. In response, Shire retreated 19p to 2,194p, leaving it well behind fellow blue-chip peers AstraZeneca (up 10p to 3,111.5p) and GlaxoSmithKline (up 13p to 1,467p).

Although the FTSE 100 dipped in and out of the red, it was a relatively steady session and by the bell the benchmark index was 8.42 points better off at 5,702.37. Helping it rise for the third straight day was an announcement from the IMF that it wants to increase its lending resources, while encouraging results from Goldman Sachs in the US were also welcomed.

Still, the latter did not stop Royal Bank of Scotland's six-session winning streak – during which it added close to 25 per cent – coming to an end. The group edged down a tiny 0.01p to 24.86p after its Direct Line and Churchill insurance businesses were both hit by fines from the FSA, although Goldman Sachs' analysts did raise their target price to 30p.

After dropping more than 26 per cent on Tuesday thanks to the loss of a major tax ruling in India, Essar Energy – which said it was likely to appeal the decision – bounced up 7 per cent to 136.2p as the Square Mile mulled over what the future holds for the power giant.

The fall prompted some rather wild speculation to do the rounds, including one suggestion that it could be vulnerable to an approach, with oil majors Shell (down 5.5p to 2,355p) and Exxon touted as possible bidders. However, City voices did not give the vague talk any credence, pointing out that the 77 per cent of the group owned by the Ruia brothers' Essar Group was a rather large hurdle to any suitors.

They were also not keen on the possibility of the billionaires taking Essar private again, instead saying a more likely scenario was that they would sell off part of their holding, which could provide cash for any tax Essar may need to pay back.

Investors rushed to sell Weir Group after fellow pump manufacturer SPX said its profits would miss expectations, knocking Weir back 75p to 2,025p. Yet analysts said it was an over reaction to the US company's update, with Panmure Gordon's Oliver Wynne-James pointing out that "the overlap [between the two] is fairly minimal".

However, Imperial Tobacco took the wooden spoon as it traded ex-dividend, with the cigarette manufacturer sliding 114p to 2,246p despite Oriel Securities' Chris Wickham starting his coverage with a "buy" rating.

Down on the FTSE 250, there was plenty of optimistic buying ahead of Kesa Electricals' trading statement today. The retailer – which is in the process of selling its struggling Comet chain – sparked up 10.89 per cent to 77.9p while fellow electricals group Dixons Retail moved another 0.92p higher to 11.86 in the wake of its positive update earlier in the week.

Also on the rise was finance house Intermediate Capital, which climbed 20.3p to 271.15p following reports that a deal has been struck to sell its patent business CPA to private equity house Cinven for £950m.

An agreement with one of the world's biggest miners fired AIM-listed digger Ncondezi up 10p, or 20.41 per cent, to 59p. The coal explorer has signed an agreement with blue-chip giant Rio Tinto (up 16.5p to 3,710.5p) that will see the two work on whether a "transport corridor" can be built in Mozambique's Tete province to export coal from the region.

Lo-Q climbed 12p to 216p after the group – which has developed technology for virtual queueing in theme parks – won another major deal, this time with US water park operator Palace Entertainment.

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