AstraZeneca shares fall after trials of key drug are unexpectedly halted

AstraZeneca, Lattice, Carlton Communications, Xansa

Shares in the drugs giant AstraZeneca slumped yesterday as the group revealed that its Phase III trials of Viozan have been cancelled. The drug, aimed at treating chronic obstructive pulmonary disease, had not shown sustained additional longer-term benefits in comparison with other available therapies.

Analysts noted that Viozan had not been expected to be a blockbuster for AstraZeneca, but it was seen as key drug in the company's R&D pipeline, at least in the nearer term. Although dealers were not expecting the setback to result in earnings downgrades, they believe that it will harm sentiment towards the stock.

The failure of Viozan overshadow news that Crestor, a new strain for lipid lowering, has been submitted in the US and Europe for regulatory approval. AstraZeneca shares were 32p lower at 3,320p. GlaxoSmithKline gained 29p to 1,978p, as market watchers noted that Glaxo has a rival drug to Viozan that it launched earlier this year.

The FTSE 100 index ended 52.2 points stronger at 5,607.9 after Wall Street rallied from recent losses. The Nasdaq and Dow Jones indices both gained. Volumes were thin as major players stood on the sidelines awaiting the Federal Reserve's interest rate decision. Yesterday traders were expecting Alan Greenspan, the Fed chairman, to sanction a cut of 25 basis points.

The techMARK 100 rallied 19.10 points to 1,754.7, from its all-time low.

ARM Holdings recovered 14.5p to 259.5p from its previous session losses on the back of weak numbers from its US peer Applied Micro.

Lattice led the FTSE 100, up 12.5p at 154p, after a generally benign regulatory review of Transco, its gas pipes business. UBS Warburg increased its price target on the stock to 184-200p from 156-176p and reiterated its "buy". ABN Amro restated its "buy" stance on the shares, while a more cautious Williams de Broe went to "hold" from "sell".

Invensys lost 2.25p to 132.75p, as Credit Suisse First Boston cut its forecasts for the engineer. The broker now expects 2002 earnings per share of 9.3p, compared with 10.2p. It is believed that the downgrade reflected weak May orders from the US.

Carlton Communications was another blue chip to sufffer at the hands of a broker downgrade, as Dresdner Kleinwort Wasserstein cut its rating to "add" from "buy" amid worries over advertising revenues and uncertainty over the creation of a single ownership of ITV. It was 7.25p off at 325p.

Xansa gained 15p to 310p after posting a 57 per cent rise in full-year profits to £42m. The group seems to have impressed even the bears at Dresdner Kleinwort Wassersten, who are set to review their "reduce" rating after the strong numbers from the IT services group against the background of the faltering global economy. Trafficmaster found itself at the top of the FTSE 250's list of fallers, losing 63p to 108p as investors hit the sell button after its sales warning. The traffic information company has lost more than half of its value in the last two sessions after what seem to have been excessively optimistic targets from management.

Private-client stockbrokers were under pressure after Teather & Greenwood complained of a quiet stock market relative to last year. The company also reported a fall in pre-tax profits to £6.3m from £9.7m last year. The share lost 14p to 162.5p, while peer Brewin Dolphin gave up 4p to 121p and Charles Stanley fell 2.5p to 320p. Collins Stewart, one of the few private-client brokers yet to warn on profits, fell 16p to 345p.

Country & Metropolitan, the house builder, advanced 3p to 95.5p after buying 11 per cent of rival Tay Homes, unchanged at 97p, which took its holding to 26.2 per cent. C&M aims to take control of Tay and will partly finance such a deal via a rights issue at 82p.

Gladstone, the e-business services group, rallied 5p to 19p from year lows after two directors bought stock. Lord Sheppard picked up 75,000 shares at 17p, while Anthony Carlton purchased 50,000 at the same price. Director share buying also helped CountryWeb.com gain 0.75p to 7.25p. Finance director Stuart Gordon added 33,000 shares to his holding, while managing director William Catchpole increased his stake by 34,000.

VFG, the supplier to the film industry, fell 0.25p to 2p as major shareholder Lochangel Investments continued to dump stock. Its latest disposal was of 250,000 shares, taking its holding to just over 12 million or 23 per cent.