AstraZeneca, Hutchinson China MediTech and Kier

“Brexit-induced panic seems to have faded with the markets in more upbeat mood on Friday. While both the FTSE 100 and FTSE 250 move up, investors will be watching like a hawk for any new indicators of whether parliament is likely to approve or reject Theresa May’s Brexit plan. “Among the large cap movers on the London market, miners and tobacco stocks do their best to push ahead, while banks and housebuilders struggle,” says Russ Mould, Investment Director at AJ Bell.

AstraZeneca and Hutchinson China MediTech

“Results from two lung cancer drug trials have had triggered very different outcomes in terms of the share price reaction for the two companies involved.

“Mega-cap pharma AstraZeneca dipped a little as it announced disappointing results from a phase III trial of its Imfinzi and Tremelimumab treatment for stage IV lung cancer.

“Investors may remember the shares suffered a much bigger shock in July 2017 when the treatment failed in its primary objective of progression free survival; today’s announcement was on the final overall survival results. Expectations were therefore already set quite low. The modest sell-off for the shares also reflects the diversified nature of the company’s drug portfolio.

“The same is not necessarily true for Hutchinson China MediTech. This business has been one of the stars on London’s junior stock market AIM in recent years but is suffering a fall from grace after its own lung cancer trial for the Fruquintinib drug resulted in failure.

“With a more concentrated portfolio, its fortunes were always going to be much more closely tied to this result.”

Kier

“There is little in the trading update from infrastructure services group Kier to truly excite investors apart from ongoing debt reduction.

“The company says its full year results will be weighted towards the second half of the year which is never a good situation to be in. Second-half weighting means a company is reliant on having a very good final six months in its financial year.

“Quite often such a statement is a precursor to a profit warning, or at least raises the risk of such an event happening as there is little time to make up for any unforeseen setbacks, should they occur.

“Kier is one of the most shorted stocks on the market, meaning there is a large group of investors betting on its share price falling. It cannot afford to experience any problems in the rest of its financial year as there are plenty of people rubbing their hands, waiting for it to make a mistake.

“The shares have already been in a general downward trend since early 2017 as many investors have questioned whether Kier will follow in the footsteps of the ill-fated Carillion because of similarities over project delays and cost overruns, and debt issues.

“So far Kier has managed to keep on the right track and the sale of its Australian Highways business earlier this week does provide a welcome cash injection. Nonetheless, it is likely to be a long process to win back the market’s favour.”

These articles are for information purposes only and are not a personal recommendation or advice.