Stock Commentary - Europe - week to June 26, 2006

EUROPEAN: bourses were all up on the reporting week to June 26, despite a mixed showing on the last day when, according to the UK's Financial Times, markets fell back on worries that eurozone monetary tightening could be more aggressive than previously thought. On the ZURICH market, Serono gained 2.6% on speculation that the firm was ready to make an acquisition, that of the UK's Shire Pharmaceuticals. This news also boosted MorphoSys on the FRANKFURT market, fuelling speculation of more acquisition moves. There, however, Merck KGaA fell 4.3% after the company announced that it is discontinuing further development of its Parkinson's disease drug candidate sarizotan because it had missed efficacy endpoints in Phase III trials (see page 18). PARIS saw Sanofi-Aventis gain 2.3% on the week, following news that its Acomplia (rimonabant) had been cleared in the European Union as a treatment for obesity (see page 18). Assuming the product also gains US approval, analysts have predicted it could generate peak annual sales for the French drug major of up to $5.0 billion.

LONDON: share prices edged up for the first four reporting days, before taking a breather on the last. Drug majors AstraZeneca and GlaxoSmithKline both moved slightly higher, 1.3% and 0.6%, respectively. Shire Pharmaceuticals was in the spotlight on June 26, on rumors that Swiss biotechnology major Serono would make a bid for the firm, although none was forthcoming even as this issue of the Marketletter went to press. Serono's interest in Shire is thought to be its acquisition last year of Transkaryotic Therapeutics, which the Swiss group had also wanted to buy (Marketletter August 8, 2005).