Market report: Wednesday close

By MICKEY CLARK FOR MAILONLINE
Updated:

 

Shire Pharmaceuticals was celebrating today after getting the go-ahead to launch a key treatment in the US. But one City broker says the move could result in the UK's third-biggest drugmaker becoming the target of a takeover.

The US Food and Drug Administration approved Shire's Lialda treatment for ulcerated colitis after successful phase three trials. Lialda can be taken orally on a daily basis by patients with active, mild and moderate forms of the illness.

It is the first treatment of its kind to be approved by the FDA and, says US broker Citigroup, could notch up sales of $150m (£77m) a year by 2010.

Lialda will be competing against the likes of Procter & Gamble's Asacol and Salix's Colazide, but Citigroup says it is the first once-daily treatment and the only one to have the induction of a remission label on top of symptom treatment.

Citigroup told clients today: 'The key date on the horizon is FDA approval of NRP101 in late February, and full-year results are on 21 February. Shire is likely to move to the top of the sector's mergers and acquisitions list once through February.'

It continues to rate the shares a buy with a 1200p target. They responded with a rise of 4p to 1088p, just 10p below their record high.

Shares generally traded in a narrow range uninspired by gains on Wall Street overnight and in the Far East this morning. The FTSE 100 index fell 11.2 points to 6204.5.

Speculative buying was directed toward Forth Ports, which was able to extend this week's lead with a rise of 46p to 2138p. Forth, the last of the independent port operators, is expected to attract an offer at some stage from an overseas infrastructure investor or from private equity.

The speculators say it could fetch up to 2400p a share, which would put a price tag on the business of more than a £1bn.

Renewed talk of a management buyout lifted Compass 5½p to 310¾p - its highest for almost two-and-a-half years. Shares of the UK's biggest independent caterer have come up from a low point of 213¼p since autumn 2005 after being savaged by profit warnings and boardroom departures. Analysts say the new management has got to grips with the company's problems.

The banks came under selling pressure after a downgrading of the sector by Swiss broker UBS. It has cut Royal Bank of Scotland, unchanged at 2032p, from buy to neutral and reduced Lloyds TSB, off 6p at 584p, from neutral to reduce because it reckons they look too expensive.

RBS has rallied 23% since reaching a low point in July, which has brought it into line with traditional sector multiples. The broker says Lloyds TSB is now at the top of its five-year trading range, and it sees little scope for short-term improvement in the shares.

The group may look to make acquisitions this year to get things going. Alliance & Leicester fell 29p to 1104p after broker Merrill Lynch downgraded from neutral to sell.

The City gave the thumbs-down to a trading update from electrical retailer DSG International and marked the shares 23¼p lower at 171p. Woolworths, on the other hand, turned out to be better than expected in the wake of last month's profits warning and the shares remained unchanged at 33½p.

Advertising giant WPP responded to an upgrading by Credit Suisse with a rise of 7p to 742½p. The broker has raised the shares from neutral to outperform and jacked up its target price from 700p to 800p.

Mecom, the media investment business that owns newspapers in Germany, helped swell stock market turnover, more than 361m shares changing hands as the price rose ½p to 75p.

A line of 146m shares, or 19% of the company, went through at 68p, matching a stake held by biggest shareholder SEB Private Bank. Further lines of 70.7m and 36.5m went through on the ticker at the same price.

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