London Report: New US pharma rules drag down UK drug firms

THE FTSE 100 took a tumble yesterday as pharma shares were hit by overnight news that the US had announced new rules to reduce the benefits available to its companies buying overseas businesses for tax reasons.

The FTSE 100 suffered a 1.44 per cent fall to 6676.08 points, its worst performance since 3 March. Poor economic data such as disappointing manufacturing surveys from the Eurozone set the tone, despite some relief that China and the US performed better than expected.

The new US rules makes deals for pharma giants Astrazeneca, pursued by Pfizer, and Shire, being acquired by AbbVie, as well as Smith & Nephew, less attractive. Astrazeneca dropped 3.57 per cent to 4,414p, Shire was down 2.49 per cent to 5,100p and Smith & Nephew fell 2.81 per cent to 1,038p.

Mid-cap sweetener-maker Tate and Lyle slumped nearly 16.72 per cent to 610p after a shock profit warning. The group said disruption in its supply chain and increased competition for its Splenda sweetener in the second quarter would hit its full year results. It now expected full-year profits to be between £230m and £245m, while analysts had been expecting a figure of around £293m.

Supermarkets were weakened further by Kantar Worldpanel’s latest report showing the UK grocery market grew at its slowest rate for more than 20 years. J Sainsbury lost 5.4 per cent to 263.80p, while Tesco dropped another 4.2 per cent to 194.5p despite parachuting in new finance director Alan Stewart several weeks early. Tesco extended its decline from Monday, when the world’s No. 3 retailer cut its profit forecast for the third time in two months after finding a fault in its accounts.

But with the Chinese manufacturing figures better than expected, mining shares regained ground, with Rio Tinto rising 1.62 per cent to 3,108p and BHP Billiton 0.64 per cent better at 1,741.5p.

Elsewhere, Go-Ahead accelerated 1.56 per cent to 2,481p after Deutsche Bank moved from “hold” to “buy” and raised its target price on the transport group from £22.70 to £27.90.

Stockbroker Panmure Gordon put on 10.32 per cent to 155p as it announced first-half profits grew from £300,000 to £1.9m and a gave a positive outlook for the second half.

Cruise company Carnival rose 0.25 per cent to 2443p after reporting a 4.7 per cent rise in third-quarter revenue and a jump in net income from $934m (£571m) to $1.25bn.