Stock Commentary - New York - week to August 27, 2007

NEW YORK: equities had a roller-coaster ride over the two-week reporting period to August 27, buffeted by the ongoing subprime mortgage market woes and investors' bargain-hunting. By close, however, the Dow Jones - which had dropped below the psychologically-important 13,000 level on August 15 - managed an overall 0.6% rise and back at 13,322.13. Within the pharmaceutical and biotechnology sectors, stocks tracked were mixed with risers just beating fallers by a ratio of 21 to 18.

ArQule shares were up 30.1% for the two-week period. Howard Liang of Leerink Swann reaffirmed his outperform rating on the stock, pointing to the firm's anticancer products. He told investors that he expects more deals relating to its cMet inhibitors that will keep investor interest high. He also kept his $12 price target on the stock. Analysts at Robert W Baird like Cephalon's plan to buy North American marketing rights to Amrix (cyclobenzaprine HCl extended-release capsules) for $100.0 million, even though it will put an almost $20.0 million dent in the company's operating income and would have been a better deal if there were more patent protection (see page 23). Michael C Rockefeller of Morgan Stanley noted that Amrix, at a reasonable price, should replace revenue Cephalon is losing to generic drugs competing with Actiq (fentanyl citrate). Amrix could hit $100.0 million in sales by 2009. David Windley of Jefferies & Co noted there will be no generic competition for Amrix, which he feels then could see turnover of more than $200.0 million by 2012. He has a buy rating and a $90 price target on the stock, which was up 7.4% for the week. PDL Biopharma's shares were up 8.9% for the reported period, but a day later the firm said it will refocus on cancer and select immunological diseases, sell its commercial assets and do away with jobs connected to the sale. It is also ending its Nuvion (visilizumab) Phase III program in ulcerative colitis, because of a lack of efficacy and an inferior safety profile, compared to intravenous steroids alone. Additionally, the company's chief executive, Mark McDade, recently resigned. With earnings expected to be much lower in the near term, the company has suspended its financial guidance for this year.