Stock Commentary - New York week to Jan 28, 2008

NEW YORK: markets, after being closed on January 21 when most others went into free-fall, opened the reporting week to January 28 with another fall, extending losses and seeing the Dow Jones drop below the 12,000 level. However, the Federal Reserve Bank's decision to cut the interest rate to 3.5% later helped stocks off their worst level, gaining for a couple of days and leaving the Dow Jones up 2.4% on the week. Pharmaceutical and biotechnology shares fell at the beginning of the reported week as fears of a recession traveled through the market. While some recovered, of the issues tracked, 31 were down and only eight saw a rise.

Vertex shares continued to drop, falling 11.3% and hitting new lows yet again. Citigroup has downgraded the stock from buy to hold, with Vertex proving earlier analysts' predictions right when it said it will start new trials for telaprevir. Rachel McMinn of Cowen feels data will be filed by mid-2010 and a New Drug Application by the end of the year. The delay in approval will allow rival drugs under development by firms such as Schering-Plough and Johnson & Johnson to be cleared first. Though Gilead reported a profit in fourth-quarter 2007 (see page 5) and some analysts feel Truvada (tenofovir plus emtricitabine) and Atripla (efavirenz plus tenofovir and emtricitabine) will continue strong, the shares fell 6.9% for the week. Jim Reddoch of Friedman Billings Ramsey upped his rating on the stock to outperform from market perform and raised his target price to $54 per share from $43. While Atripla was expected to cannibalize Truvada, sales of the latter continue to grow, he said. Michael King of Rodman & Renshaw says Europe will be a strong market for these drugs, and he has a market outperform rating on the stock, with a price target of $56 per share. Jason Kantor of RBC Capital Markets feels Letairis (ambrisentan) will be a meaningful contributor to earnings in 2008. PDL BioPharma, off 6.9%, gets a very small percentage of royalty on Roche and Genentech's sales of Avastin (bevacizumab), which has received European approval for colorectal cancer (see page 20). Investors are still focusing on the bad news for Nuvion (visilizumab), the firing of PDL's chief executive and the lack of a buyer.