Stock Commentary - Europe - week to Dec 15, 2008

EUROPEAN: bourses put in a mixed performance in the reporting week to December 15, mostly advancing the first two days and then going into decline, particularly on December 12 when shares prices were pummelled by news of a major investment fraud (see New York column). The drug sector was not helped by a report from Fitch Ratings which, while saying that underlying credit fundamentals remain strong, the outlook for the European pharmaceutical industry is negative due to a number of key challenges, including the "patent expiry cliff," government cost-containment, longer times to get new compounds approved and generic competition. DSM was a bright spot on the AMSTERDAM exchange, rising 10.9% on the week after announcing a profit-warning along with job cuts. In FRANKFURT, Evotec plunged 9.3% following the news that its chief executive, Jorn Aldag, had resigned. Bayer managed a 1.2% gain after its upbeat Perspective on Innovation presentation (page 5), while MorphoSys gained 3.4%.

LONDON: shares were marginally lower on the week, with the FTSE 100 down just 0.5%. Elan suffered a drubbing on two fronts, falling 10.5%. There was a further case of progressive multifocal leukoencephalopathy reported with Tysabri (natalizumab; page 23); and there was a call for the resignation of its chief executive as the firm announced staff cuts to maintain pipeline funding (page 4). Vernalis was strong, advancing 12.2%, buoyed by expectations that a new chief executive and chief financial officer - both due this month - will help the company's fortunes. Phytopharm was down 10.3%, still hurting after Unilever's decision to pull out of a Hoodia development deal (Marketletter December 8).