Stock Commentary - Europe - week to March 10, 2008

EUROPEAN: bourses started the reporting period to March 10 in negative mode, despite a fairly steady performance in New York. March 5 saw a brief improvement in sentiment, but then it was downhill all the way, with indexes sharply lower across the board. Pharmaceutical stocks were pretty battered. Analysts at Lehman Brothers noted that the major European drug sector is trading with valuations at a three-year low, with company pipeline output being a major concern for investors. In ZURICH, there was a 6.4% fall for Roche for which the Lehman team sees little short-term upside following a series of positive newsflow for the firm. On the FRANKFURT exchange, Bayer slumped 9.3% on the news of a negative US court ruling, finding that the firm's patent on Yasmin (drospirenone/ethinyl estradiol) was invalid (Marketletter March 10). The stock was not helped either by several brokers cutting their target price on the stock following this news plus that the parent firm has lowered its margin forecast for Bayer HealthCare. MorphoSys fell 3.9%, despite posting much improved profit (see page 6).

LONDON: saw drug share prices mostly lower, with some severely slashed. Over the majors, AstraZeneca dipped just 3.0%, while GlaxoSmithKline was down 7.1%, after US regulators said they wanted more data from makers of asthma drugs to evaluate their safety. It was also not helped by a critical report relating to its allegedly not revealing negative trial data on its antidepressant paroxetine (Marketletter March 10). Alizyme rose 2.8% on the week, with analysts at Edison Investment noting that following a fund raising, the company has sufficient cash for well into 2009.