Market Report: Wellcome benefits from new view of drug sector

WELLCOME, due to report year's figures next week, was one of the blue chips on a roll as shares climbed to yet another high.

The attitude towards the drug sector appears to have changed quite dramatically this week with Wertheim Schroder, the US investment house, encouraging a more positive American approach to what has been a sadly underperforming sector.

This week Wellcome has advanced 89.5p to 845.5p, including yesterday's 22.5p gain. In addition to the more positive US stance the group has scored from the progress it is making in finding a successor to its highly successful Zovirax herpes and shingles drug, which is beginning to lose its patent protection.

Although the company is best known for its Retrovir Aids treatment, Zovirax is Wellcome's most lucrative product. It achieved sales of pounds 586m last year and is expected to hit pounds 745m this year.

But the drugs group faces intense competition. SmithKline Beecham, up 13.5p to 448p, is also busy producing a rival drug. Both Wellcome and SKB claim their new treatments will be more effective than Zovirax.

The Wellcome results, due on Thursday, are expected to emerge at pounds 665m, a jump of more than pounds 160m. A sharp dividend increase, following the Glaxo Holdings example, is also anticipated. A year's payment of 16p against 13p is one possibility intriguing some observers.

Zeneca jumped 14.5p to 797.5p, highest since the split from Imperial Chemical Industries, and Fisons, where some still speculate about a Zeneca strike, gained 6.5p to 170p with the unorthodox antics of one market-maker prompting much of the headway.

Glaxo, however, missed the fun. The temporary shutdown of an Indian plant and far from impressive sales by its important Imigran migraine drug in the US did the damage. The shares ended 7.5p lower at 715.5p.

The FT-SE 100 index just failed to break through 3,200 points, ending at 3,199, up 10.7. The second line FT-SE 250 index jumped 20.8 to a 3,547 peak.

US influences were responsible for much of the progress. American institutions, seeking to place some of their vast hoard of investment cash, were evident buyers.

Other overseas forces were also present. And domestic institutions remained interested. Yield and recovery factors were the most obvious buying magnets.

Further interest rate cuts also provided inspiration. The French cut clearly puts pressure on the Chancellor to reduce rates.

ICI, out of favour with most domestic institutions, is still popular among the Americans. They were responsible for a 20p jump to 729p. Smith New Court is far less bearish than some other London investment houses. It is looking for third-quarter profits, due next week, of pounds 70m.

Rothmans International ended its career as a constituent of the FT-SE 100 with a 4.5p gain to 625.5p.

It has been removed following its restructuring, which produces two groups - Rothmans, taking in the tobacco interests, and Vendome, embracing the luxury goods division.

Many analysts regard the two groups as a buy. Williams de Broe is the latest to adopt a bullish stance. Dunhill, disappearing in the revamp, gained 3.5p to 349p.

Southern Electric is Rothmans' Footsie replacement. The shares, in a firm sector, jumped 18.5p to 624.5p.

United Biscuits put on 4p to 376p with Kleinwort Benson describing the shares as 'seriously undervalued'.

Royal Insurance attracted a clutch of buy recommendations although the shares ended only 1p higher at 326p. Standard Chartered jumped 21p to 1,036p with Societe Generale Strauss Turnbull positive.

Proteus, the computerised drugs group, held at 479p. UBS, recently appointed joint stockbroker, produced a buy circular.

Losses will continue and no dividend is expected in the 'foreseeable future'. But the company's unique position in the drug industry makes it 'a part of a biotechnology portfolio'.

Jefferson Smurfit, the Irish packaging group, fell 8p to 213p as up to 2 million shares were placed at 215p.

Amberley, the building preservation group, made an impressive return following its acquisition of a performance materials operation. Suspended at 40p, the shares were actively traded, reaching 56p. They closed at 51p.

Virtuality's impressive run came to an abrupt end - the shares fell 21p to 301p. They were floated at 170p.

Crockfords, the casino group which arrived via a reverse takeover of the old TV-am, continued to find support, gaining 4p to 126p after 130p. Since the revamp the shares have been as low as 95p.

Another newcomer, Sharelink, improved 13p to 380p and Business Technology, following the arrival of Alan Baldwin, gained 4p to 23p.

More records; the FT-SE 100 index gained 10.7 points to 3,199 and the FT-SE 250 index 20.8 to 3,547. Turnover was 658.5 million shares with 34,422 bargains. The account ends on 8 November with settlement on 29 October. Government stocks were mixed.

Emerald Energy is being elevated from the 535 market to the USM; dealings start on 16 November. A US property is being sold and US oil assets pumped in. Peter Winton, ex-Tricentrol, will run the show. Wilton, with showbusiness ambitions, will retain a significant stake. Stockbrokers John Siddall and Walker Crips Weddle Beck have placed shares at 1p each.

Meggitt, the electronic and engineering group, shaded 1p to 100p as Smith New Court placed 4.5 million shares. They were unloaded by an institution. The price has moved narrowly this year. Despite disappointing interim profits the year's results are expected to show modest progress. But hopes are pinned on next year when an advance to to pounds 27.5m is on the cards.

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