Stock Commentary - New York week to Aug 13, 2007

NEW YORK: equities started the reporting week to August 13 in positive mode, with a particularly strong showing on August 8, when some of the recently worst-hit stocks made a recovery. However, the remainder of the period saw stocks falling as subprime mortgage market woes resurfaced, seeing the Dow Jones plunge over 2.8% on August 9 and leaving the index 1.7% lower overall. Drug and biotechnology stock were mostly lower, with 23 of those tracked falling and 16 rising.

The strongest performers were Ligand, up 11.6%, and Medarex, which rose 15.4 on reporting a narrowing second quarter loss (Marketletter August 13). Genzyme shares fell 8.3% after the company agreed to pay $64.0 million in a shareholder class action that was brought after the consolidation of the firm's tracking stock structure in 2003 (see page 2). Also, Genzyme is having trouble producing enough Myozyme (alglucosidase) because of delayed approval of a new plant. Some analysts have said they are not as positive about the sales potential for the product. Though the company has forecast a 20% earnings growth over the next five years, the stock has been moving down and is trading at a discount to its peers. According to analysts, the firm is facing competition in all its product areas and worry about competition for its biggest moneymakers. Wyeth stock, down 5.8%, is suffering after two Food and Drug Administration decisions and the stoppage of a clinical trial has removed three hoped-for big drugs from its pipeline. Bifeprunox (see page 18) and Pristiq (desvenlafaxine) both received not approvable letters from the FDA and trials of product being tested for hepatitis C were ended over toxicity questions. Wyeth is waiting for data from a mid-stage trial for an Alzheimer's drug being developed with Elan; an earlier version showed troublesome side effects. Some analysts now feel that earnings per share growth basically will be flat through 2011. Swift restructuring at Amgen (down 1%) to respond to recent setbacks will lead to an increase in profits, according to Geoffrey Porges of Sanford C Bernstein, who feels the news could come before September 11 when the company will discuss Aranesp (darbepoetin Alfa) and Epogen (Epoetin alfa) safety with the FDA.