Stock Commentary - New York week to Aug 11, 2008

NEW YORK: equities advanced for the second week in the reporting period to August 11, helped to a large extent by falling crude oil prices, despite supply concerns after a Kurdish militant group claimed responsibility for an explosion at a key eastern Turkey pipeline. The Federal Reserve Bank holding interest rates was another factor, along with some encouraging financial results, leaving the Dow Jones Industrial Index 4.4% higher overall. Most of the big drug and biotechnology companies have finished second-quarter reporting (Marketletters passim), and this week's tally saw 28 of those tracked rising and only eight seeing a decline.

Affymetrix was up a significant 15.6%, despite the odds against it. For example, this was a week when the Massachusetts Institute of Technology filed a law suit against the biotechnology firm alleging its GeneChip technology infringed MIT's existing patents. Also, the company slipped into a second-quarter loss, with turnover down slightly (Marketletter August 11). The good news was that the Food and Drug Administration has granted regulatory clearance for Affymetrix' GCS300Dx platform for in vitro gene expression diagnostic testing. Medarex was 10% lower, having reported a wider second-quarter loss, due to charges related to affiliate Avant Therapeutics, and falling short of Wall Street expectations. Another to move lower on poor figures was King Pharmaceuticals, which declined 3.9% on the week after reporting a 34% profits fall and 27% drop in sales, while Mylan advanced 8.2%, despite moving into a loss (see page 5 for both stories). Valeant Pharma managed a strong 13.5% gain, helped by the news that it had sold one of its European businesses to Swedish firm Meda, for a consideration of $392.0 million in cash (Marketletter August 11). The deal with Meda gives the latter entry into the Russian pharmaceutical market, but does not include Valeant's Central European operation, which covers the Czech Republic, Hungary, Poland and Slovakia, and generates turnover of around $130.0 million a year. Among takeover targets, Genentech gained a further 2.2%, to exceed the offer price from majority owner Roche (see page 2), while ImClone declined a modest 1.4%.