GSK boosted by portfolio sale
GLAXOSMITHKLINE shares were 7.5p firmer at 1461.5p as talk intensified that the UK’s biggest drug company is on the cusp of selling off its portfolio of older drugs sold in key US and European markets.
Glaxo has indicated that it is looking for offers in the region of two times sales of the drugs, which include antidepressant Paxil, Zantac for acid reflux and nausea treatment Zofran.
The stable of so- called mature drugs – which are subject to generic competition and therefore slowing sales in developed markets – could bring in more than $3bn according to Reuters.
But the Brentford-based group is keen to keep the rights for emerging markets, where sales have yet to falter.
The newswire cited private equity group Apollo Global Management as the frontrunner in the drugs auction, for which final bids are expected next week.
‘Given question marks over GSK’s constrained balance sheet and the need to defend its dividend, it would most likely simply retain the cash to shore up the balance sheet,’ said Berenberg analysts.
However Glaxo may also consider using the cash to fund a share buy-back and thus offset any earning per share dilution from the deal.
Also under the spotlight in the pharmaceutical sector was AstraZeneca.
The shares came under pressure ahead of an investor day next Tuesday, at which the UK’s second biggest drugs firm is expected to update the market on its early pipeline of new medicines.
Furthermore, spurned suitor Pfizer’s cooling off period is set to lapse on November 26 but industry watchers played down the possibility of the US giant coming back for another bite at the apple. The likelihood of a friendly offer was further diminished by new US tax laws that make the financial benefits of such a deal much less attractive.
The shares fell over 2pc in midday trading, but recovered slightly to close down 76.5p at 4655.5p.
The FTSE 100 index ended the session up 18.92 points at 6654.37.
Over on Wall Street, the Dow Jones was down 21.24 points at 17,631.55 in early trading.
The retail sector bounced back from a torrid few weeks led by Kingfisher, up 5.1p at 296.9p, with Sainsbury’s up 5p at 270.1p, Tesco 3.85p firmer at 195p and luxury darling Burberry 26p higher at 1558p. FTSE 250 stock Debenhams rose 2.3p to 69.25p. ‘Christ- mas is now just six weeks away and the markets appear to have decided that food retailers have been punished enough,’ said Alastair McCaig, market analyst at IG.
Elsewhere, a spate of company announcements provided some colour to the Footsie, with Aggreko leading the risers after an upbeat trading statement in which the temporary power and generator group reiterated its full year forecasts.
Third quarter underlying revenue was up 6pc although adverse currency movements had an impact on reported revenues, which fell by 3pc.
The opportunity for growth ‘ remains significant and 2014 should prove a trough year for profit,’ said Liberum analyst David Brockton.
However, Brockton, who rates the stock a ‘hold’ with a 1735p price target, was cautious on the impact of increased competition. Aggreko shares were up 52p at 1594p.
Elsewhere, IMI, the UK engineering group, reversed early session losses and ended the week up 17p at 1256p after announcing it is to buy Germany’s Bopp & Reuther Holding for ¤152.6m (£122m), giving it a foothold in the growing Chinese and Indian markets. The Birmingham-based group said that revenues fell by 6pc in the four months to the end of October.
On the second line, Premier Farnell plunged nearly 9pc after issuing a profits warning for the full year. The technology products distributor blamed increased competition in the UK, and softer market conditions in Europe and Asia in the third quarter for the projected shortfall; the shares ended the week 15.8p lower at 164.1p.
Rotork was also under pressure, shedding 99p to 2401p after announcing a 1pc decline in third quarter revenue due to the timing of deliveries. Orders at its Fluid Systems unit fell by 18pc, reflecting a strong comparable period last year as well as a drop off in orders from Russia as trade sanctions start to bite.
Finally, Restaurant Group shares came under pressure after the owner of Garfunkel’s and Frankie & Benny’s warned that appetites have been curtailed since the end of August although it still expects to report robust full year results.
The shares fell 30.5p to 654p.