Drug focus turns to smaller firms

With the outlook for the traditional giants of the drugs sector under review as valuable patents expire, attention is switching to smaller players and to those with a reasonably full product pipeline. Two companies attracting particular attention have been Ireland's Elan and Galen. The former shows no ill effects from the retirement of its founder Dr Allen McClay.

Galen's announcement of positive results in testing of its oestrogen intra-vaginal ring product raised hopes that the company could take a decent share of the hormone replacement therapy market which is worth £3 billion and is reckoned to be growing at the rate of 10 per cent a year. The company's broker Goodbody rates Galen a buy with a target price of £10 sterling, a rise from its level earlier this week of £7.15 sterling.

Elan has suffered recently from concern over product review delays and analyst concerns about the way it presents its figures. A new report from Merrion Stockbrokers is optimistic about the prospects for the company's shares in the coming months, looking for values in the $55 to $60 range compared to the present $47-$48, and rating it a buy. Merrion reckons approval for both Frovelan and Ziconotide will be forthcoming this year and that the longer-term outlook is bolstered by upbeat results for both multiple sclerosis drug Antegren and AN-1792.