Stock Commentary - Europe - week to Mar 20, 2006

EUROPEAN: bourses were all up to some extent, fuelled by takeover speculation but not, in this week to March 20, in the pharmaceutical sector. FRANKFURT saw a dull performance from Merck KGaA and its hostile takeover target Schering AG with the former unchanged and the latter down just 1.8% after its meteoric rise of nearly 40% the previous week (Marketletter March 20). Schering's rejection of the $17.7 billion bid is now backed by its workforce, which fears redundancies (see page 28). Altana gained 4.0% after posting good 2005 results, with better-than-expected 2006 guidance (see page 6). In ZURICH, there was not much movement for drug stocks, with Novartis down most, 1.3%, on profit-taking, and Serono up 0.9% as the biggest changes. PARIS saw a lackluster performance from drug major Sanofi-Aventis, down 3.1%, after its positive showing the previous week on good clinical trial presentations at the American College of Cardiology meeting (Marketletter March 20). bioMerieux dipped 1.9% ahead of results (see page 7).

LONDON: share prices meandred around during the reporting week, leaving the FTSE 100 up 0.7% overall. But, with the exception of little Alizyme, which gained 5.7%, all the drug stocks were lower. Merrill Lynch has raised its Alizyme price target to 215 pence from 170 pence and reiterated its buy rating. The broker sees a higher probability of the firm licensing its obesity drug cetilistat and now includes mucositis drug ATL-104 in its valuation. The firm's "plump pipeline" - with three Phase III products - raises Alizyme's acquisition potential, it added. Vernalis, which posted higher losses for the full-year 2005, slipped 0.9%.