Shares in Axis-Shield fall amid R&D fears

SHARES in medical testing kit maker Axis-Shield fell by 4.4 per cent yesterday after the firm warned that research and development (R&D) cuts at its business partners could harm its laboratory services division.

The Dundee-based firm also said it was too early to predict how heavily this winter's flu season would strike.

In its third-quarter trading update yesterday, Axis-Shield said it was still suffering from the effects of last winter's "light" flu season, when demand for its testing kits was not as high as had been predicted.

But chief executive Ian Gilham said the firm was still "confident" about the trading outlook for the rest of the year.

Gilham said: "We are pleased with the progress made across the business during the period and are in a strong position to meet our 2010 forecasts.

"We are adopting a cautious approach to 2011 mainly due to external influences such as the extent of the flu season together with the anticipated tightening of R&D budgets. The underlying business at Axis-Shield is well positioned for growth and sustainable profitability."

The firm said that its direct distribution division had "continued to operate well", especially in Switzerland, but that hospital budgets in Norway had been "constrained".

Axis-Shield said that underlying demand for its flu testing kit appeared to be growing, as doctors make more of an effort to tell the difference between bacterial and viral infections and therefore reduce the use of antibiotics, which only kill bacteria.

Dr Mike Mitchell, an analyst at Seymour Pierce, said: "Overall, the statement is likely to renew concerns about near-term volatility, particularly in the laboratory division, while our positive view on positioning over the longer-term leads us to retain our 'add' recommendation."

Shares closed down 12p last night at 260p.