Stock Commentary - New York week to April 16, 2007

NEW YORK: equities moved higher on all but one of the reporting days to April 16, leaving the Dow Jones up 1.2% overall. Nearly all the pharmaceutical and biotechnology stocks increased, 33 up versus six down. As drug company earnings come in, with some exceeding forecasts, analysts are expecting the sector this year to return to outperforming the market, pointing to income from new products and old standbys, a decrease in patent expirations and savings from consolidation. The combination of these factors is replacing the cost-cutting alone that fueled the better numbers a few years ago, it was noted.

During the reported week and in advance it its financial results, Merck & Co leapt 10.2% after raising its 2007 guidance. It also got some good news from a Texas ruling that could weaken the legal foundation for all 1,000 Vioxx (rofecoxib) cases filed throughout the state, but took a hit when a Food and Drug Administration panel recommended the agency to not approve Arcoxia (etoricoxib) because of an elevated risk of heart attacks and strokes (see page 18). Goldman Sachs upgraded its rating on the Merck to neutral from sell, and pointed to the company handling patent expirations in what it termed a "superior manner" compared with other players in the industry. Schering Plough, up 6.9%, is also expected to do well going forward, with revenue driven by sales of Nasonex (mometasone furoate), the anti-inflammatory drug Remicade (infliximab), and its joint venture with Merck on Zetia (ezetimibe) and Vytorin (simvastatin). Up 3.6%, Pfizer has said that it will not see top-line growth for another two years, when sales from new products kick in. Vertex' shares were off 5.2% after a study reported relatively positive data for telaprevir but also indicated some unpleasant side effects. The company is testing the drug in combination with standard hepatitis C therapies to see if it can help shorten treatment time. Amylin stock was up 6.8% after the company said its net loss for the quarter was down substantially compared with last year. Jason Zhang of Prudential Financial has kept his neutral weight rating on the stock and raised his estimates for the company. The firm's first-quarter 2007 earnings per share came in ahead of the estimates.