Stock Commentary - New York week to December 4

NEW YORK: equities were reasonably strong in the reporting period to December 4, despite the ever weakening dollar, although there was a slight downturn ahead of the weekend on poor retail data. Pharmaceutical and biotechnology stocks were also mainly higher, with 29 of those tracked rising and just 11 falling.

After assuring analysts that its pipeline was healthy, pointing specifically to torcetrapib, Pfizer stock tumbled 7.7% as an unexpected number of deaths were linked to the drug and further development was scrapped (see pages 3 and 18). The company has cash now, with more coming in after the sale of its consumer products division to Johnson & Johnson (up 1.1%); it is now expected to accelerate merger and licensing deals as it looks for new products, but it is also expected that potential collaborators will take advantage of the situation and ask for premium prices when making a deal. Pfizer is in a tough spot because it wants to show investors it is taking action to improve its fortunes but purchasing another firm or licensing products are also very risky, said Jason Napodano of Zacks Independent Research, who has downgraded the stock to sell from neutral, noting that while it pays an attractive yield and has a stock buyback program, these are not long-term strategies. Several drugmakers could benefit from Pfizer's problem. Merck & Co (+2.5%) and Schering-Plough (+6.6%) make Zetia (ezetimibe) and Vytorin, a combination of Zetia and Merck's Zocor (simvastatin). Merck is also developing two drugs to raise good cholesterol. And Abbott Laboratories, up 3.7%, has said it would buy Kos (Marketletter November 13), which makes Niaspan (niacin extended-release tablets), the only so-far approved drug to raise good cholesterol. Medarex shares rose, with several different factors playing into the 12.3% increase. Some investors felt that Pfizer might now be interested in the company's technology. The stock was also helped by an upgrade from equal weight to overweight from Sapna Srivastava of Morgan Stanley, who told clients that he expects late-stage second-line melanoma therapy trials for Medarex' anti-CTLA-4 drug ipilimumab, as well as Pfizer's ticilimumab, to show positive results.