Stock Commentary - Europe - week to Oct 16, 2006

European: bourses were all strong during the reporting week to October 16, repeatedly hitting five-year highs, although with a blip on October 13, when investors took a little profit. However, the pharmaceutical sectors were mixed ahead of the third-quarter results reporting period, with little news driving stocks either way. Merck KGaA was the worst performer on the FRANKFURT exchange, falling 3.5%, despite getting a buy rating from analysts at ING Financial Markets, who have set a 12-month price target on the stock of 99.00 euros. The ING team feels that Merck's buy of Swiss biotechnology group Serono has brought in a better capital structure on increased debt and says the price paid for the firm is full and fair. Investors responded positively to LION Bioscience's capital increase relating to its acquisition of SYNGIS Bioscience GmbH, sending the stock up a further 20.1% after its previous week's13.2% rise. ZURICH welcomed Roche's first nine month 2006 results (see page 3), with its stock the only one to see again on this bourse.

LONDON: share prices were strong, with the FTSE 100 gaining 2.3% over the period. Shire Pharma dropped 4.6%, after its 16.3% gain the previous week on the news of tentative US Food and Drug Administration clearance of its next-generation attention-deficit hyperactivity disorder drug NRP104 (Marketletter October 16), as investors saw the hike this had created as overdone, especially after its US partner, New River, disclosed profit-sharing details which were less favorable to the US company. Acambis gained 5.0%, with investors finally reacting to the $16.5 million sale of its Berna Products business (Marketletter October 9).