Yesterday's trading: Cervarix cure for GSK

By Geoff Foster for MailOnline
Updated: 03:11 EDT, 19 January 2007

Get well soon GlaxoSmithKline. The drugs giant has some catching up to do following last year's 9% share price fall.

It has begun 2007 on the front foot, and yesterday cash-rich fund managers chased the stock 15p higher to 1413p on hefty turnover of 48m in the belief that confidence will flood back to the stock and the sector in 2007.

Long-suffering shareholders will be pleased to know that apparently the search for a replacement for Jean-Pierre Garnier is nearing conclusion. He became chief executive in January 2001 following the merger of SmithKline Beecham and Glaxo Wellcome and will certainly be a hard act to follow.

Industry sources suggest his successor will be found 'in-house' and an announcement will be made as soon as possible in order to divert unwanted speculation.

In the meantime, dealers took news that GSK is to conduct a head-to-head trial of its cervical cancer candidate vaccine Cervarix against rival treatment Gardasil, which is already on the market and made by Merck, as very positive.

Charles Stanley's analyst Jeremy Batstone described it as a very bold move to compare the efficacy of Cervarix with market leader Gardasil. GSK has long argued the strength of its product and thus the delay announced at the third-quarter results contributed to the ensuing share price underperformance.

Batstone assumes Cervarix sales of just £355m by 2010, reflecting aggressive competition, but seeing GSK comparing its drug with Gardasil, it does provide him with greater confidence in the product. He advises clients to keep on buying. GSK is one of Charles Stanley's top picks for 2007.

Rival AstraZeneca, which many believe will one day end up in bed with GSK, cheapened 13p to 2885p.

Higher commodity prices and sympathetic gains in heavyweight mining stocks helped the Footsie power forward to trade 52 points higher before Wall Street's opening.

It then retreated to close only 5.8 points higher at 6,210.3 after the Dow lost 28 points within minutes when Fed chairman Ben Bernanke warned the US economy could be in danger if Social Security and Medicare are not revamped.

A Deutsche Bank recommendation helped Enterprise Inns fizz 27p higher to 658p. Still dreaming of a bid from private equity group Starwood, InterContinental Hotels rose 35p to 1255p. But Mitchells & Butlers lost 4½p to 681p after Citigroup placed 6m shares with institutional investors at 677p a share.

Michael Spencer's money broking giant ICAP advanced 10¼p to 506½p after Citigroup lifted its target price to 570p.

Pearson added 11½p more to 836p on continuing speculation that Dame Marjorie Scardino will soon put the Financial Times up for sale. Talk of a possible bid from KKR, where Lord Hollick is acquisitions adviser, also did the rounds.

Awaiting Michael Grade's first strategic move as new boss, struggling broadcaster ITV dipped 1¼p to 108¾p. Rumours suggest he has found a buyer willing to pay £6,200 a share for its 9% stake in premiership football club Arsenal.

Colt Telecom was top FTSE 250 performer, ringing up a gain of 8¾p to 170¾p after Goldman Sachs upgraded to buy from neutral. Hoping it will soon confirm plans to convert to a tax efficient Real Estate Investment Trust, Big Yellow Group rose 22p to 631p.

Oil services group Abbot rose 6p to 296p on speculation of an imminent private equity bid of around £4 from a private equity group.

Talk of a pending bullish circular lifted Medical Marketing 13p to 161p. Eurovestech, the technology investment fund run by former Schroder analyst Richard Bernstein, rose 1½p to 21p on institutional support.

Blackrock edged up 0.13p to 0.75p following a placing of 317m shares at 0.5p, to raise £1.585m. Funds raised will be used for additional working capital and to fund the next payment to its Colombian venture partner Kappa Resources, Colombia.

The discovery of oil in the Golovnaya prospect on Block 74 in Russia's Tomsk helped Imperial Energy climb 24½p to 639½p.

Metalrax, the worldwide supplier of specialist steel products, firmed 4¾p to 69¾p, following a trading update.

Online auctioneer QXL Ricardo jumped 67p in a thin market to 715p following a strong third-quarter profits performance. Broker Evolution's target price is £10. It expects it to double turnover over the next couple of years.

• FOLLOWING a positive trading update, Aim-listed computer services group Statpro gained 2½p to 108p. Broker Arbuthnot rates the stock a strong buy and forecasts a 33% leap in 2006 earnings per share to 6p and a doubled dividend of 1p. It is happy with the group's recurring revenue base and maintains its 130p target price.