Hot Small Caps: Shire leads gainers in pharma sector

LONDON (Reuters) - Following is a round-up of key small cap movers on the London stock market on Friday.

13:09 GMT - Shire leads UK pharma stocks higher

Shares in Shire (SHP.L) lead gainers among UK pharmaceutical stocks, up 7.2 percent, as JP Morgan reiterates its 'overweight' stance and raises its price target on the stock to 1,084 pence from 1,014 previously.

JP Morgan cites strong third quarter results reported by Shire on Wednesday and moves by management to address concerns over its cost base.

Meanwhile, Panmure analyst Savvas Neophytou welcomes Shire's prediction that earnings in 2009 will match analyst expectations. Analysts had previously feared that Shire would not have enough firepower to replace revenues from its current top seller, Adderall XR, which faces generic competition from next year.

"Drawing a line under that will allow the stock to start trading on fundamentals," he says.

"Although AstraZeneca (AZN.L), Glaxo (GSK.L) and other European pharmaceutical companies have been outperforming the markets in general, Shire hasn't really benefited from the macro switch into pharmaceuticals because of the concerns for 2009 and Adderall XR," he adds.

Other companies in the sector also rise, boosted by the perceived defensive merits of the sector. GlaxoSmithKline gains 4.9 percent with Smith & Nephew (SN.L) up 2.9 percent and AstraZeneca rises 1.7 percent.

"The cash generation capability of this sector, which has had a good couple of years of restructuring its cost base in anticipation of price pressures in the U.S., has enabled it to be in a better position compared to the broader markets to weather any pressures," says Neophytou.