GlaxoSmithKline is top blue chip after US watchdog’s thumbs up

11 April 2012

GlaxoSmithKline was London's best-performing blue chip today after the US drugs watchdog smiled on the medicines maker.

The Food and Drug Administration's advisory panel has given a unanimous thumbs up to Potiga, an epilepsy treatment GSK has made with partner Valeant Pharmaceuticals, for preventing seizures.

Evolution Securities estimates that peak sales of the treatment should come in at $500 million (£320.5 million).

"It emphasises that GSK is passing its patent cliff and returning to growth," said analyst Dominic Valder.

He is a buyer of the shares, with a 1550p price target. Valder added: "We believe it is time for investors to look at GSK again."

They appeared to be listening, with its shares rising 18p to 1120½p, boosted as well by investors ditching riskier punts for more defensive stocks.

London's top flight managed to post modest gains as bid chatter helped to end the sell-off. The benchmark ticked up 7.75 points to 5252.96. However, the FTSE 250 index, a better barometer of the health of the British economy than its sibling, fell 73 points to 9781.49.

Many may consider it a match made in hell: Amnesty International's adversary is reportedly considering a bid for one of Greenpeace's biggest villains.

India-focused miner Vedanta Resources is said to be in talks to snap up assets or take a large equity stake in oil explorer Cairn Energy.

The activities of both companies have led to extensive criticism: Cairn incurred the wrath of the green lobby for drilling off the coast of Greenland, while Vedanta has been under attack for its plans to build a bauxite mine in an area considered sacred by indigenous people.

Credit Suisse wasn't impressed by the reports of a possible deal, either.

"It would be a strange move for Vedanta to move into oil by acquiring all or part of Cairn Energy," analysts at the Swiss bank said. "We struggle to see any strategic fit or synergies.

"Funding the acquisition would also be a big issue for Vedanta, which has committed to pay $1.3 billion for Anglo American's zinc assets and [has] little room to take on more debt.

"Investor concerns about over-leverage and delivery of growth will only increase if the rumours are true."

But the move had the City excited on an otherwise dull August day. Cairn — the Footsie's biggest loser yesterday – surged 13½p to 458.3p. Vedanta was the worst-performing blue chip, however, shedding 46p to 2311p, amid concerns it might overpay.

From a possible acquisition in the oil industry to a takeover which looks to be floundering.

FTSE 250-listed Dana Petroleum lost 176p to 1517p — a decline of 10% — after the oil explorer said that talks with its South Korean suitor had stalled.

Bosses said they had offered to open their books for due diligence, but Korean National Oil Corporation knocked back its invitation to enter into a non-disclosure agreement. However, the whisper is that KNOC is still committed to bidding for Dana.

Two of London's biggest losers of recent weeks were the day's biggest winners.

Crisis-struck social housing services provider Connaught jumped 2.6p to 18¼p, while builder Rok clawed back a little of yesterday's mega losses after an admission of "serious failings in financial controls".

Rok was up 1¼p at 18p, with traders reckoning it was a bear squeeze. At least its bosses have a modicum of faith in the company: seven directors have added slightly to their holdings.

888 Holdings was flat at 42½p. Speculation is that the online gambling group could be a target for the merged PartyGaming and Bwin entity.

On Aim, Vialogy was a standout after striking a deal with a "global supermajor oil firm". Shares in the company, which provides sensor technology to oil explorers, climbed 1p to 5p.

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GlaxoSmithKline is top blue chip after US watchdog’s thumbs up

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