GlaxoSmithKline presses ahead with regulatory approval for lung drug Relovair, while Astra confirms guidance after error
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This article titled “FTSE falters again, as Glaxo reveals mixed drug trial results and AstraZeneca sends out wrong data” was written by Nick Fletcher, for guardian.co.uk on Monday 9th January 2012 17.09 UTC
As the market slipped back once more on eurozone woes, the UK’s two biggest pharmaceutical groups were under pressure, albeit for different reasons.
GlaxoSmithKline fell 62p to £14.35, a 4% decline, after mixed results from clinical trials of its new lung drug Relovair, while AstraZeneca lost 33.5p to £30.09 after mistakenly sending out confidential information to City analysts.
Glaxo said it was pushing ahead with a regulatory filing for Relovair, despite the product failing to show any real superiority to its existing Advair treatment. Glaxo is also investigating reports of fatal pneumonia at some of the higher dose levels. Brian White at Shore Capital said:
Glaxo has stated that it has clearly seen enough to warrant regulatory filings globally. However, the data are probably not as clean as we would have liked and although the lack of superiority versus [existing drug] Advair probably has little relevance to approvability, we believe that it could limit its commercial positioning. The pneumonia signal is concerning though, and the lack of consistency in the pivotal Phase III programme suggests a far from straightforward regulatory passage particularly in the US.
On Friday there was vague talk Glaxo could be looking at US group Human Genome.
Meanwhile there were red faces at AstraZeneca, which distributed what it called “out of date planning information” in a spreadsheet sent to analysts. Astra felt obliged to repeat the guidance it issued on 20 December, saying it expected to report earnings per share for 2011 in the lower half of the range of $7.20 to $7.40.
The falls in Glaxo and Astra helped push the FTSE 100 37.42 points lower to 5612.26. But the main reason for the decline was once again the continuing eurozone crisis, as Germany’s Angela Merkel warned Greece it needed to hurry up and agree a deal with its creditors to get its next aid payment. Angus Campbell, head of sales at Capital Spreads, said:
The grand posturing by European leaders has recommenced following the break over Christmas and New Year with [France's Nicolas] Sarkozy going to meet his opposite number in Berlin, yet investors remain sceptical about the situation in the eurozone improving. A plethora of summits is due to get underway this month and judging by how the week has commenced for equity markets, expectations are not particularly high.
Recent economic data may have surprised to the upside but it seems that none of this is able to give investors the confidence they require to go out and buy up equities.
Investors were deserting banks again as shares in Italy’s Unicredit continued to tumble following news of its heavily discounted cash call. Barclays dropped 8.3p to 178.1p, Lloyds Banking Group lost 0.92p to 26.19p and Royal Bank of Scotland slipped 0.44p to 20.07p.
Among the risers were havens like utility groups National Grid, up 14.5p at 624p, and International Power, 3.8p higher at 342.4p.
A Deutsche Bank recommendation lifted Intercontinental Hotels by 21p to £11.95. The bank raised its target price from £13.65 to £14.40 and its recommendation from hold to buy.
Among the mid-caps JD Sports jumped another 40p to 700p after confirming it was paying £20m for the assets of Blacks Leisure in a pre-pack administration deal. Rentokil Initial rose 1.4p to 66p after Credit Suisse upgraded the company from neutral to outperform with an 85p a share target. It said the pest control business was a high margin operation, and the troubled Citylink parcels business could be through the worst:
We think that contract wins and cost reduction will take Citylink back to profitability in the second half of 2012. If the business does not improve this year we think management will need to consider a closure or sale of the business. We think the current Rentokil price is discounting that the division loses money in perpetuity.
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