Stock Commentary - Europe - week to Jan 1, 2007

8 January 2007

EUROPEAN: bourses stomped ahead during the three-week, holiday-spattered reporting period to January 1, with strong gains for the full year. In US dollar terms, Germany was up 35.2%, France 34.0% and Switzerland 27.5% over the year. In ZURICH, there was a stellar performance from Actelion, which rose 11.6% over the reporting period. It was boosted by promising new data on its endothelin antagonist Tracleer (bosentan), which could expand the indications for the drug (see page 33). JP Morgan analyst Annie Cheng maintains her overweight rating on Actelion, while raising her estimates for the stock from 265 Swiss francs to 300 francs. Actelion has already gained 146.6% over 2006. FRANKFURT saw a mixed showing, with biotechnology issues LION Bioscience and MorphoSys moving in opposite directions, down 7.0% and up 8.9%, respectively. while drug major Bayer rose 3.2% and Merck KGaA fell 4.7%.

LONDON: share prices ended 2006 somewhat subdued, rising just 1.0%, although up 28.2% in dollar terms - and 12.4% in local currency - over the year. AstraZeneca disappointed, with a 5.1% decline over the reporting period, impacted by the news of a negative European Patent Office ruling for its blockbuster gastrointestinal drug Nexium (esomeprazole; see page 2). Shire was off 0.6%, despite rising at various stages on speculation of a takeover bid from AstraZeneca. SkyePharma leapt a massive 23.6%, lifted by US approval of an asthma device co-developed with Novartis. It also gained on the news of a L35.0 million ($68.3 million) financing agreement (see page 28). Vernalis rose 13.6% after initiating a Phase I study of a promising antiobestity compound.

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