Stock Commentary - New York week to Feb 16, 2009

NEW YORK: equities went into reverse during the reporting period to February 16, having had a positive previous week, with the Dow Jones  Industrial Average falling a sharp 4.6% on the first day to drop below  the psychologically-important 8,000 level, after new Financial  Secretary Tim Geithner's financial package failed to enthuse  investors. The index stayed there for the rest of the President's Day  holiday-shortened week. Drug and biotechnology stocks did not provide  any respite, with 25 of those tracked falling and just eight seeing a  rise. The sector had a down week, off 5.1%. After the close of trading  on February 13, Congress approved the Economic Stimulus Bill, which  included $1.1 billion in funds for comparative-effectiveness  research. While supporters of the provision feel the research will  save money by discouraging the use of costly, ineffective treatments,  drugmakers fear that the findings will be used by insurers or the  government to ration care by denying coverage for more expensive  therapies.

After key patents on Skelaxin (metaxolone) were invalidated  (Marketletter February 16), King Pharma said it would restructure and  cut back its workforce to decrease operating expenses, with just under  a third of the layoffs associated with synergies from the Alpharma  acquisition. All of the charges are expected to incur in the first half  of 2009, the firm said. Investors must have been positive about the  plans and willing to overlook other news, as the stock was up 6% for the  week. The firm is the most affected by a Food and Drug Administration  plan to have drug companies to do more about cutting back abuse of  opiates, narcotics and DEA Class 2 Controlled Substances. King is  developing Remoxy (oxycodone) and Embeda (morphine sulfate/naltrexone  HCl). Allergan's offer of a $50-off coupon for Botox had investors  feeling more positive about the stock. The company offered a coupon,  rather than a price cut, since it retains profits, especially when not  all consumers use the discount. As the economy soured, doctors have  reported fewer patients coming in for Botox. Cephalon stock fell 3.1%,  as its fourth-quarter sales rose but earnings dived 72% after it took a  huge charge at the end of a co-promotion deal for Vivitrol  (naltrexone).