Stock Commentary - New York week to Feb 25, 2008

NEW YORK: equities gyrated their way through the reporting period to February 25, with a strong close on the last day, boosted by good showings from several sectors, including pharmaceuticals. The Dow Jones closed the week up 1.8% with gainers among drug and biotechnology stocks outnumbering losers by 25 to 14.

ImClone's shares were boosted to outperform from neutral by Eric Schmidt of Cowen, who feels Erbitux (cetuximab) will be approved for lung cancer based on data from an ongoing study and quickly gain market share. The stock moved up 13.7% on the news. While he still has some concern the drug might not be approved or might do badly because of poor data, he generally feels that the study findings will be positive and the drug will take about 40% of patients ineligible for Avastin (bevacizumab), so bringing in at least $500.0 million to $1.0 billion in sales. Meantime, the unexpectedly-early approval of Avastin for breast cancer boosted Genentech's shares 7.3% for the week (see page 18). Recent positive data on Rituxan (rituximab) in treating multiple sclerosis also played into the rise in share price. Even the news that the company lost patent protection for a key drugmaking process did not shake the shares after the close of the reported week. And, while many analysts expect the drug to have significant penetration in the market and increased their sales estimates for the drug, William Tanner of Leerink Swann feels some doctors are already using the drug extensively in the metastatic setting, so there could be a less robust uptake and some investor disappointment. Jim Reddoch of Friedman, Billings, Ramsey also told clients that it is possible if data to be released later this year shows the drug to be as effective at a low dose as at a high dose, more doctors will cut back to a half-dose and revenue will fall short of expectations. Poor fourth-quarter 2007 figures (see page 6) pushed Ligand shares down 9.1%, and the company also estimated that it would have operating expenses of $36.0- $39.0 million in 2008, as well taking a $4.1 million non-cash charge. The firm expects to take in about $20.0 million in royalties from King Pharma for sales of Avinza (morphine sulfate) and possible milestone payments from other corporate partners.