Stock Commentary - Europe - week to July7, 2008

EUROPEAN: bourses were all down for the reporting week to July 7, having started the period with sharp falls on July 1 and 4, the latter when there was no Wall Street influence due to the Independence Day holiday in the USA. The last day, however, was upbeat, on a weakening in crude oil prices and, despite it finally closing lower, a strong opening of the Dow Jones. For the first time in quite a while, the stocks of drug majors were coming into favor as defensive plays. FRANKFURT saw the market dip just 0.4% week-on-week. There, drug major Merck KGaA plunged 10.5%, sharply impacted by a down grade from Morgan Stanley from equal neutral to underweight. Bayer managed a 2% gain. The star, however, was Evotec, which leapt 10.8%, after reporting strong Phase Ib results for its Alzheimer's disease drug candidate EVT 101 (see page 22). PARIS saw a sharp 6.3% rise in Sanofi-Aventis, one of those seen as defensive, while bioMerieux fell 4.4%. Novartis and little Speedel outperformed the ZURICH market's 2.1% decline, rising 3.2% and 4.2%, respectively, while Roche fell 2.7% and Actelion declined 5.2%.

LONDON: share prices moved much in line with the rest of Europe. The pharmaceutical majors AstraZeneca and GlaxoSmithKline both benefited from defensive buying, rising 9.7% and 6.1%, respectively. However, the former had the added advantage of getting a favorable US court ruling relating to its patent for the blockbuster bipolar disorder drug Seroquel (quetiapine fumarate; Marketletter July 7). Meantime, Vernalis plunged 15.8%, despite completing a deal with France's Ipsen, which bought the UK company's American operations (Marketletter June 16).