MARKET REPORT: Drug giants fail to swallow Ariad Pharmaceuticals

As shares of UK pharmaceutical giants GlaxoSmithKline shed 9.5p to 1,614p and Shire declined 20p to 3,035p, dealers heard that both had lost out in the auction for Massachusetts-based Ariad Pharmaceuticals.



They were strongly tipped, along with Eli Lilly, to be willing to pay up to $20 a share for Ariad. The firm's treatment for leukemia – called Ponatinib – was given the green light by the Big Daddy of all regulators, the FDA.

Rumours from across the Pond now suggest that Jazz Pharmaceuticals, a dynamic pharmaceutical biopharma company, with a market capitalisation of $8billion, is willing to pay $20-plus a share to get its hands on Ariad, which was trading at $7.65 a share early yesterday and has jumped 18 per cent since January on bid speculation.



Rumours suggest that Jazz Pharmaceuticals is willing to pay $20-plus a share to get its hands on Ariad

As soon as Ariad announced the commercial availability of Ponatinib for adult patients with refractory chronic myeloid leukemia, global pharmaceutical players were all over it.



They all want to enhance their positions in the crucial cancer treatment field and Ariad would be a perfect bolt-on. Elsewhere, dealers were in need of some inspiration.



But rumours that tattooed football icon David Beckham is teaming up with old football ‘friends’ and the Qataris to launch a bid for Manchester United were kicked into touch. The Footsie drifted 16.98 points lower to 6,588.32 and the FTSE 250 50.75 points to 16,202.17. Wall Street eased 4.76 points to 16,264.23 as a report showed modest economic growth in the fourth quarter.



Telecoms giant BT buzzed 1.6p higher to 379.9p despite a UBS sell recommendation following news that Marc Watson, the chief executive of BT TV, is leaving after seven years to take on a fresh challenge.



The company said the search for a ‘new MD of BT TV is well under way’ but analyst Nick Lyall wonders what this implies for the development of BT TV and its affect on upcoming rights auctions and wholesale talks with Sky. He worries that BT will struggle to recoup its costs from BT – it lost an estimated £90million in the third quarter – and estimates annual losses of £100million to £300million in future.



BSkyB, which remains the numero uno sports TV channel, climbed 14p to 930p. Tullow Oil shed 18p to 759p after reporting disappointing results from drilling onshore Kenya. Cairn Energy added 6.2p to 173.3p on a Investec recommendation and target price of 220p. Analysts were underwhelmed with Nigeria-focused Afren’s results and the close was 7.8p down at 143p.



Canaccord Genuity is a buyer and says the results show steady progress and confirms a five-year tax holiday for the Ebok field, offshore Nigeria.



Shares of Strategic Natural Resources crashed 3.5p, or 53.85pc, to 3p. Investors sprinted for the exit on hearing late on Wednesday that the company had received notice from London Commodity Brokers that its lawyers have filed a winding-up petition with the Companies Court in London. LCB claims it is owed $1.15million.

In December technology entrepreneur Andrew Ruhan handed an interest-free loan of £875,000 to the company to help pay off creditors of its 74 per cent-owned subsidiary Elitheni which runs coal assets in South Africa.

Mediterranean Oil & Gas gushed 0.88p, or 17 per cent, to 6p after winning a long-standing court case brought against it by Leni Gas, 8.59 per cent lower at 0.74p.



Leni sued MOG for not providing enough information about an exploration block offshore Malta, which it bought from Leni for a nominal sum of $1 and farmed out weeks later for $10million. Leni said it would not have sold its stake for such a low sum had it been aware of interest from potential farm-in partners.



Justice Males, pronouncing judgement on the case, said Leni’s case failed ‘at every stage’, particularly as he judged there was ‘no question of any intention to mislead’ on the part of MOG’s chief executive, Bill Higgs.



Cash shell Octagonal edged up 0.01p to 0.38p after acquiring a 10 per cent stake in financial services company GIS UK. The latter’s global settlement and safe custody clearing business alone transacts for over 300 global hedge funds and family wealth offices.



eServGlobal jumped 4.63p to 53.12p after announcing that MoneyGram, a leading global money transfer company, had signed an agreement to connect to HomeSend, its technology hub for person-to-person fund transfers. It will allow MoneyGram customers to remit funds to mobile accounts of HomeSend hub members, including Vodafone and Airtel.

