Stock Commentary - New York week to Jan 8, 2007

NEW YORK: equities meandered through the holiday-shortened week to January 8, with little direction as the markets awaited fourth-quarter and year-end 2006 financial results. Pharmaceutical and biotechnology stocks, having ended the previous reporting period largely negative, saw a better performance, with 27 of those tracked rising and 13 falling. Fundamentals in the drug sector are mixed, according to Joseph Tooley of the AGE Pharmaceutical Group, who told clients that favorable demographic trends and new product innovation are increasing demand for drug products but unfavorable pricing and political risks could collectively squeeze margins and profits. Group earnings per share should grow a steady 12% in 2007 versus 7%-8% forecast for the S&P500. If the expected economic slowing occurs in 2007, the sector could benefit from those moving into defensive stocks, he noted, though this could be stalled by fears of changes to Medicare Part D and other uncertainties ahead. Still, he does not think that drastic changes to this are likely this year.

Eric Ende of Merrill feels that ImClone stock and Erbitux (cetuximab) will get a boost from positive colorectal cancer trial data and that its market share will not be as badly affected as thought by Amgen's Vectibix (panitumumab intravenous infusion), which has a better dosing regimen, a better side effects profile and a lower price. Erbitux sales will still see pressure, he cautioned. ImClone is trading toward the low end of his break-up value range of $25-$30, based on Erbitux sales, net cash, the pipeline and manufacturing assets, he said, boosting the stock to neutral from sell. ImClone stock was up 8.8%. Favorable analyst reports helped Genzyme stock move up a similar 8.8% during the reported week. Christopher Raymond of Robert W Baird raised his rating on the stock to outperform from neutral, with a price target of $75, noting a recent pull-back in the price and the expected October approval of Renvela (sevelamer carbonate) which will mitigate pressure on Renagel (sevelamer). Jennifer Chao of Citicorp reiterated her buy rating, pointing to a better-than-expected 2006 and 2007 financial outlook, an under-appreciated pipeline and upcoming near-term catalysts.