Stock Commentary - New York week to Feb 11, 2008

NEW YORK: equities started the reporting week to February 11 with a more than 2.9% fall, as US recession fears were flamed by a weak service sector activity index as well as manufacturing data. Although further movements in the Dow Jones were much more tempered, even ending with a small 0.5% rise on the last day helped by the oil sector on rising prices of crude, the index ended 3.1% lower overall. With mixed fourth-quarter and full-year 2007 results coming from the pharmaceutical and biotechnology companies, these were mostly lower, with 35 of those tracked falling and just four seeing a rise.

Bucking the downward trend, Alpharma shares continued to rise, up 14.2%, on strong sales of the just-launched Flector (diclofenac epolamine) topical patch and a reduced generic threat to Kadian (morphine sulfate) extended-release, as well as news that the firm is selling its API business to the 3i group for $395.0 million in cash, with the proceeds to go to what it called strategic growth opportunities in both pharmaceuticals and animal health (see page 28). On the flip side, Mylan stock was off 14.4% on news that the company will delay updating its guidance when it reports earnings at the end of the month. Investors and analysts alike questioned exactly what the delay means. Ken Cacciatore of Oppenheimer told clients that the move could be based on a combination of good news on international performance and negatives on sales of Perforomist (formoterol fumarate), which really means a similar guidance to the October one. The company also said that integrating Merck KgaA's generic unit took precedence over updating the guidance. He is holding to his outperform rating, while Randall Stanicky of Goldman Sachs has moved from recommended because he feels there is no push to stock growth without a guidance. Still, he has a buy rating and a $19 price target on the stock. Vertex shares, down 10.3%, hit their lowest point in the last few years as costs deepened fourth-quarter 2007 loss, leading to a 2008 outlook lower than analysts' expectations. The firm continues to spend as it develops telaprevir and several analysts feel this will be worth it. Goldman Sachs' Meg Malloy is holding onto her buy rating, but lowered her price target $2 to $41.