Stock Commentary - New York week to Jan 19, 2009

NEW YORK: equities started the reporting week to January 19 in negative mood and, despite gaining a little pace before the Martin Luther King  holiday on the last day, the Dow Jones Industrial Average closed the  period 2.3% lower. Ahead of the inauguration of President Barack Obama,  pharmaceutical and biotechnology stocks were mixed, with 19 of those  tracked rising, 13 falling and one unchanged. While campaigning, Mr  Obama pledged to overhaul the health care system, but spending  designated for the economic stimulus package may mean putting this part  of his agenda on hold. Still, House Democrats have recommended that some  $1.1 billion of the $825.0-billion stimulus plan be allocated to  research comparing the effectiveness of drugs and devices covered by  Medicare and Medicaid and there is industry concern that these studies  would favor older and cheaper products, as the push to cut costs  intensifies.

Meanwhile, Thomas Lee of JP Morgan has upgraded his rating on the health  care sector, as a whole, to overweight from neutral, pointing out that  the stocks are generally cheap compared with their expected earnings,  and that profit growth in the sector could beat expectations. Shares  could see an average gain of 25% this year, he told clients, with  significant buyout activity as companies look to replace revenue lost  by patent expiries. Gilead, up only 1.3% this week, is among his top  picks, with his lowest ratings going to companies that included PDL  Biopharma (up 8.9%). Amylin stock moved 5.7% higher for the week, as  expectations grew that the Food and Drug Administration may make its  decision in the first quarter on a once-weekly formulation of Byetta  (exenatide) and on updated labeling for the drug.  Ahead of an early  February earnings report that is expected to be good, Biogen Idec shares  advanced 5.4%. The company has moved a long-acting version of Avonex  (interferon beta-1a) ahead quickly in trials, but noted that sales of  Tysabri (natalizumab) slowed in the fourth quarter amid safety  concerns. Biogen partners on Tysabri with Elan, which could be up for  sale. Until 2010, Biogen has the rights to buy Tysabri if Elan is sold  but, until that date, is banned from taking over the company itself.