Copycat drugs may spark mergers

THE market's addiction to drug shares - usually a bedrock of stability - could be about to end. Two warnings sent temperatures rising. A report from broker Salomon Smith Barney said the sector faces a number of threats.

US watchdog the FDA is getting tougher on approving new drugs and there is more competition from cheap copycat products. The concern was echoed by Sir Richard Sykes, chairman of GlaxoSmithKline, who told a biotech conference that a flood of copycats could trigger a new round of consolidation in the industry.

He warned some companies face 'significant difficulties' next year as drug patents expire. 'You cannot lose sales of billions of dollars and expect to go forward as usual. It is not possible,' he said.

GSK could be in the vanguard of moves to swallow vulnerable rivals. It eased 5p at 1750p, while fellow heavyweight AstraZeneca, currently defending patents on a blockbuster drug in the US, fell 23p to 3050p.

The Footsie took its losing run to five straight sessions, ending 45.1 points down at 5074.9, its lowest finish since the beginning of November. The damage was done by a worrying 3.7% dip in US retail sales in November and slow sales from software group Logica, 125p off at 705p. That dragged tech stocks down.

BSkyB fell 53 1/2p to 746p after French media giant Vivendi unveiled the placing of an 8% stake worth more than £1bn.

Cluff Mining extracted a 16p gain at 236p on encouraging results from its Blue Ridge platinum project in South Africa. It hopes to begin full-scale production by 2003. The shares have more than doubled this year.

Mining minnow ZincOx Resources, listed at 120p early in December, sank a further 4 1/2p at 96 1/2p.

Shell fell 8 1/2p to 454 1/2p. Opec is to hold an emergency meeting on December 28 if rival nations have not cut oil supplies by then.

Rare celebrations for Manchester United - a home win and news that it is to host the 2002 final of the Champions League - left the shares 1p up at 133p. When it slumped below 120p, JP McManus and John Magnier, racing chums of manager Sir Alex Ferguson, took advantage to begin stakebuilding to near 9%. They may now sit on the sidelines and wait for further weakness.

Urgent assistance from its star Lara Croft is needed at computer games designer Eidos, off another 15 1/2p at 165p after touching 157 1/2p on half-time losses and worries of a poor Christmas because of faltering sales of games such as Who Wants To Be A Millionaire? The shares once touched 1144p. Avesco, whose 49% associate owns rights to the TV game show, fell a further 12 1/2p to 425p after already warning of a slowdown. The shares were 1105p.

Computer games publisher Rage Software, maker of David Beckham Soccer, was dragged down by Eidos, shedding 1p at 7 3/4p, a two-month low. Rage has lost ground in the last few weeks. Heavy spending on the Beckham game has failed to achieve sales targets.

Persistent worries over the strength of record giant EMI's Christmas releases left the shares sharply lower at 340 1/4p, down 20 3/4p, not helped by a reported bed-and-breakfast sale by a big institution.

Alain Levy has been hired as chairman of the recorded music division, but it is too early to see much impact. EMI once touched the giddy heights of 799 1/2p. Any prolonged weakness is bound to restart rumours about a bid.

Despite its impressive profit performance, deals to move into Japan and plans to jazz up its Little Chef chain, contract caterer Compass shed 23p at 494 1/2p. Dealers said it may have bounced too fast from the post-September 11 dive to 398p.

BROKER SG Cowen heaped praise on biotech group SkyePharma, which has just taken a strategic stake in a US firm developing what could be a wonder vaccine for the skin disease psoriasis. The potential, if it clears regulatory hurdles, is immense, with 7m patients in the US and 250,000 new cases diagnosed every year. Even without income from the vaccine, the shares are worth 188p against a market price of 55p, the broker claims.