The Investment Column: Nycomed deals prove a success

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The Independent Online
NYCOMED Amersham has had a hectic year, completing not one but two mergers to create a real force in the worldwide healthcare market. Both deals have been a real success for shareholders. Underlying earnings per share, perhaps the best way to measure the growth in the business, jumped 41 per cent to 90.1p . The share price has reflected this great performance, rising strongly since last Autumn.

The new group has only just started to reap the benefit of cost savings, which should rise to pounds 70m by the turn of the century. But the group will have to start producing strong organic growth to justify its rating. Its X-ray business will continue to suffer this year from a price war in the US.

A slimmed down pharmaceutical business is showing better returns following a sharp cut in the research and development budget. The real driver to growth, however, will be its life sciences business, which specialises in developing ways to speed up the development of new drugs.

The shares slipped 59p to 2271p yesterday on US trading and currency fears. ABN Amro Hoare Govett forecasts current year profits of pounds 227m, putting the shares on a prospective p/e of 22. Nycomed Amersham still looks like a solid hold with good long term prospects.