Investor - An insider's guide to the market: Globalisation has become one of the buzz-words in financial and economic commentary.

In the stock market it has come to be associated with the emergence of large multinational companies whose shares are traded on a global basis.

A side effect of this trend is increased links between the world's stock markets that can sometimes lead to greater volatility.

Globalisation has affected most sectors of the market to some extent. Some, such as telecommunications and technology, as well as pharmaceuticals, have been transformed.

In this regard some sectors of the market have become far more "global" than others. In particular, throughout the 1980s and 1990s, the pharmaceutical sector was transformed into a truly global industry through a series of large-scale cross-border mergers and acquisitions. Several international companies have now grown into global leaders.

One of the largest and best-known is GlaxoSmithKline (GSK), which currently has a market capitalisation of £76 billion sterling (€108 billion).

Success and growth for these large pharmaceutical companies is critically dependent on their ability to bring new drugs and remedies to the marketplace. However, even the largest companies tend to rely heavily on a small number of blockbuster drugs for a disproportionate share of their overall profits.

The big competitive pressure on these companies is that patent protection eventually expires, enabling cheaper generic equivalents to flood the market and depress profitability.

GSK, which is Europe's largest drug company, recently held a research and development day to showcase to investors its development pipeline. According to the company it has more than 20 potential $1 billion a year blockbuster drugs in development to drive future sales growth and lift it out of a lean patch for research productivity. The stock market was unimpressed by the information, mainly it would seem due to the fact that few of its most promising new drugs will reach the market before 2006.

In fact, several of the large global pharmaceutical companies have been finding the going quite tough in recent years. This has been reflected in stock market performance, where the pharmaceutical sectors in Europe and the US have been under-performing.

The year-to-date return for the FTSE E300 pharma sector is only 2.9 per cent and the return for the Standard & Poor's pharma sector is just 1.6 per cent, both well below the return for the overall market indices.

The Irish exchange has a small listed pharmaceutical sector that includes Elan, Galen and United Drug. Not surprisingly these are niche players in very specific sectors of the industry.

Measured by market capitalisation Galen is the largest of the three, with a value of just under €2.5 billion. Elan, once the largest quoted stock on the Irish exchange, now has a market capitalisation of barely €2 billion. United Drug, which is involved mainly in wholesaling, is capitalised at approximately €500 million.

The share prices of these three companies have performed very well in 2003. Elan's share price has more than doubled, although this is not as impressive as it seems, given that it was recovering from an extremely low level. Although Galen had a poor 2002, 2003 has witnessed a return to strength with a close to 50 per cent gain it its share price. United Drug has been a steady performer for many years and 2003 is proving to be no exception, as its shares have risen by 20 per cent.

As well as the above companies, the sector also includes ICO, which provides contract clinical research services to the global pharmaceutical industry, and Trinity Biotech, which develops and markets a range of human diagnostic products.

Although the Irish-quoted pharmaceutical sector is one of the smaller on the Irish exchange, it offers investors a range of interesting investment opportunities. It is, however, a very high-risk sector, as highlighted by Elan's fall from grace in recent years.

Nevertheless, for brave investors, rewards may be sufficient to outweigh risks if these firms can succeed in implementing their respective business plans.