Novartis Gains on Profit Report

Royal Dutch Shell higher on brokerage upgrade; plus more of Tuesday's European stocks in the news

From Standard & Poor's European MarketScope

France ARCELOR rose €0.11 to €18.97 on Tuesday. CSFB upgraded the European steel sector to overweight from market weight. Elsewhere, the company and Mittal Steel have paid a deposit of US$200 million as the bid for Ukraine's VAT Kryvorizhstal approaches, according to Les Echos. The company has teamed up with Ukraine's Industrial Union of Donbass, but the paper reckons the price will the determining factor.

VALEO rose €0.26 to €32.99. The company's CEO Thierry Moring has told Le Figaro that it could be eyeing units of Delphi that come up for sale after the U.S. car parts maker filed for bankruptcy.

ALSTOM fell €0.80 to €39.50. The company's senior vice-president for Northern Europe, Terence Watson, has accused Transport for London Commissioner Bob Kiley of playing politics over the company's underground trains maintenance contract, according to the FT. Kiley had earlier sought to terminate the contract following problems with the emergency brakes affecting the Northern Line. The 20-year contract is estimated at £429 million.


ALTANA rose €0.63 to €46.03. The company has not initiated a process to sell its pharma unit, a source reportedly says. As reported earlier, the company is, according to the WSJ, readying itself to sell its pharma business for around US$7 billion. This represents a change in strategy following comments not so long ago that it is looking to strengthen the business via acquisitions. An auction of the business is being mulled. But nothing hard and fast has been decided yet.

SCHERING (SHR ) rose €0.19 to €50.85. The company has signed a global licensing deal with Sonus Pharmaceuticals giving it the exclusive worldwide licence for Tocosol Paclitaxel, which is currently in Phase III testing for breast cancer. A filing is seen by the end of 2007. The company will take a nearly 15% stake in Sonus.

BAYER (BAY ) fell €0.16 to €29.38. The company will test its Avelox antibiotic against tuberculosis in 2,500 patients and will cut the price in poor countries if studies show the treatment is effective against the disease. On the broker front, Morgan Stanley lifted its target to €36 from €34 as it sticks to overweight.

ZAPF CREATION fell €0.79 to €7.90. Zapf's CFO quit after the company indicated it may have to restate its 2004 results and is considering taking legal action against some of its managers. DAIMLERCHRYSLER DCX fell €0.56 to €42.12. Daimler has received offers worth around €1.7 billion for its MTU Friedrichshafen diesel engine business, according to the FAZ.


FIAT rose €0.02 to €7.07. Italian industrial output will probably rise around 1% in the third quarter of 2005, helped by production of the company's Punto, Confindustria's president, Luca Cordero di Montezemolo, has reportedly said. Confindustria is the Italian employers confederation.

UNICREDIT was down €0.03 to €4.62. The EU Commission is expected to give its green light to the company's bid for Germany's HVB Tuesday, the Italian press reports, adding that the company's takeup is estimated at around 70%.


PHILIPS (PHG ) rose €0.20 to €21.84. The company said it would push for an improved credit rating to allow it to take on debt for acquisitions, the FT reports. The daily says Philips will try to persuate Moody's to lift its rating from Baa1, matchingits A- rating with Standard & Poor's.

ASML (ASML ) fell €0.20 to €14.07. After the U.S. close Monday night IBM posted a dip in third quarter net profit but results topped Wall Street expectations as revenue from consulting grew for a second straight quarter. However, Novellus posted a sharply lower quarterly profit amid a protracted industry-wide slump. Still, Dresdner KW says Novellus's problems are company-specific. The frim reiterated its buy rating on ASML and its €18.0 target.


ARCELOR (Sp) rose €0.01 to €18.91 on the CSFB steel sector upgrade.

UNION FENOSA fell €0.23 to €26.72. Citigroup downgraded the shares to sell from hold and raised its target to €25.50 from €24. Elsewhere, the company late Monday named Pedro Lopez Jimenez as its new non-executive chairman.


NOVARTIS (NVS ) rose CHF2.70 to CHF68.35. The company reported 9-month group sales of US$23.55 billion, up 14% (+12% in local currency); operating income up of US$5.41 billion, up 13%; net income of US$4.78 billion, up 13%; and basic EPS of US$2.05. Overall, the numbers were above expectations. The company continues to expect high single-digit net sales growth as well as record levels of operating and net income on a comparable basis to 2004 (excluding the impact of the Hexal and EonLabs acquisitions). Ixis Securities upgraded the shares to add from reduce, keeping its CHF72 price target. The broker thinks a nice surprise in the current results comes from the profitability in the Pharmacy business.

ROCHE gained CHF4.80 to CHF192.80. The company's arthritis drug Actemra shows promise in a study, when compared to conventional therapies. Separately, the FDA has approved a new facility, which allows expanded production of bird flu drug Tamiflu. Meanwhile, Indian-based Cipla's Joint Managing Director Amar Lulla said in an interview (Bloomberg) that he will seek talks to gain licenses from the company to make generic versions of Tamiflu to cope with increased demand. Note that tomorrow, the company publishes third quarter sales. CSFB expects another strong performance driven mainly by the Genentech Oncology portfolio. Overall for the group, the broker forecasts sales of CHF8.498 billion (up 15% reported; up 14% underlying).

SERONO fell CHF7.00 to CHF826.00. The company's U.S. affiliates have agreed to settle the government investigation led by the U.S. Attorney's office in Massachusetts into commercial practices related to Serostim. The company explains that this investigation was part of an ongoing industry-wide investigation by the states and the federal government of commercial practices. Serono adds the comprehensive settlements with federal and state agencies will conclude all liabilities to the government in connection with the investigation, and says the US$725 million provision to cover the settlement and related costs will be sufficient to cover the comprehensive settlements and related costs.

United Kingdom

ASTRAZENECA (UK) (AZN ) fell £0.54 to £26.13. The company says it has received a notice from Ranbaxy Pharmaceuticals that it has submitted an Abbreviated New Drug Application (ANDA) involving the company's Nexium. The company says it has 45 days within which to commence a patent infringement lawsuit against Ranbaxy that would automatically stay, or bar, the FDA from approving Ranbaxy's ANDA for 30 months or until an adverse court decision, whichever may occur earlier.

AVIVA rose £0.20 to £6.42. The company set a new improved target for its worldwide general insurance business to meet or beat a combined operating ratio of 98%. It expects total pretax profit per annum from the RAC acquisition of £250 million by the end of 2008; cost savings of £100 million per share from the integration of RAC in 2006, rising to £130 million per annum from 2008.

ROYAL DUTCH SHELL (RD ) gell £0.16 to £18.02. Goldman Sachs raised the shares to outperform from in line.

ANTOFAGASTA HOLDING gained £0.07 to £14.77. Copper prices rose to fresh highs in early pre-market on the London Metals Exchange, as a number of banks were said to be in the market, as stocks fell, Platts reports. Notes the target remains the US$4000 per metric ton level and it should be tested later in the session.

ARM HOLDINGS fell £0.13 to £1.05. The company reported third quarter revenues of £56.70 million; income before tax of £19.10 million; and EPS of 1.05p. It says there are several encouraging trends in these results, adding that the company has had a faster growth rate than the semi industry as a whole. Arm expects dollar revenue growth for the full fiscal yearof approximately 15%, vs. its 15%-20% previous guidance.

Prepared by European MarketScope reporters Zaida Espana (France), Michael Sanderson (Germany), Mariella Mongio (Italy), Alexander Wisch (Netherlands), Holly Cook (Nordic), Emma Stevenson (Spain), Pawan Girglani (Switzerland), and Rocio Opazo-Aniotz (UK)

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