Pessimism about AstraZeneca’s pipeline sent shares in the drugs company to the top of FTSE 100 fallers’ board on a day when the wider market moved sideways.
Astra’s key cancer and respiratory projects are progressing, but delays to others, such as brodalumab, the psoriasis drug, underline the risks on relying on its new pipeline, Credit Suisse said, downgrading the stock to “underperform”.
“We expect investors to favour stocks with greater short-term earnings visibility,” the bank said.
Running the numbers over 39 therapeutics companies, analysts scored Astra, which publishes third-quarter results next month, among the lowest and found a “marked deterioration in pricing power”. Cutting the drugs company’s target price to £40 from £43.20, investors took note, marking Astra’s shares down by 132p to £40.24½p, further away from the £48 the shares were changing hands for amid Pfizer’s approach in May last year.
Its peer GlaxoSmithKline, off 8½p at £13.36½p, was upgraded to “neutral” by Credit Suisse, which forecast that the launch of Nucala, an asthma drug, would help margins.
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The FTSE 100 traded in a tight range and ended the session 7.20 points lower at 6,345.13. With traders taking few risks, so-called defensive stocks were in favour. Next, the high street stalwart, rose 170p to £78.40 and United Utilities added 11p to 991p.
Well-received trading updates also helped. InterContinental Hotels climbed 160p to £24.71, the biggest riser, after the owner of Crowne Plaza topped third-quarter forecasts. Whitbread gained 157p to £48.82 as the company behind Premier Inn held its full-year guidance.
Other leaders included Inmarsat, up 32½p at 955½p, after the satellite company did a ten-year deal with Lufthansa to provide internet access across its European fleet. Glencore rose 3½p to 113½p as volatile trading continued.
Weighing on London’s leading index was Tesco, 4½p off at about 189p, which underperformed other listed grocers after the retailer suffered the second-worst sales performance, according to industry figures from Kantar.
Still with the FTSE 100 and Shire was another siognificant faller, weakened by Exane BNP Paribas reiterating its “neutral” outlook before the drug company’s third-quarter results on Friday, arguing that its proposed acquisition of Baxalta remained a big overhang on the shares and had little support among investors.
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A deal that looks likely to close, Berenberg said, was Aveva’s complex reverse takeover by Schneider Electric, of France, announced in July. The bank upgraded the engineering software company, up 74p to £20.82, to “buy”. It helped the FTSE 250 to rise by 66.69 points to 16,984.03.
The bidding war for Al Noor Hospitals, up 15p at £11.80, intensified, with the UAE healthcare company confirming that VPS Healthcare was a third interested party.
Stemming gains was Vedanta Resources, which slumped 43p to 499p after denying speculation that Tom Albanese, its chief executive, was on his way out of the mining group after the appointment of Cynthia Carroll, an industry veteran, as an adviser last month.
Among the tiddlers, a bear raid on Globo, the software company, had retail investors excited, pushing the shares down by 5p to 33p.
Grass grows greener in Canada
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The loonie may have been largely unmoved, but shares in companies in the medical marijuana industry were flying high after the election of Justin Trudeau’s Liberal party in Canada.
One of Mr Trudeau’s most eye-catching policies during his campaign was his pledge to legalise recreational cannabis use, although he is yet to explain how the drug will be taxed or how quickly he will loosen controls.
Shares in Canopy Growth Corp, the Ontario-based producer of medical marijuana, whose brands include Tweed and Bedrocan and which had surged in advance of polling day, soared as high as 21 per cent when markets opened, before wafting lower. The rival Ontario companies, Aphria and Mettrum Health, jumped 5.3 per cent and 7.6 per cent, respectively, over the trading day as investors expected laws to be relaxed as they have in parts of the United States.
Analysts said that the uptake in the recreational market would be quick once it was legal and that the nascent medical marijuana market could grow from an estimated C$800 million to C$100 million a year to C$2 billion to C$5 billion.
Wall Street report
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Another day, another highwire-style balancing act on Wall Street, with sliding healthcare stocks and IBM on one side of the line and a rising United Technologies on the other. The Dow Jones industrial average closed 13.43 points down at 17,217.11.