Stock Commentary - New York week to July 10, 2006

NEW YORK: equities started the July 4 holiday-shortened week in negative mode, with investors returning from their breaks to the news of North Korea's missile testing. This was followed by another off day on July 7, when the Dow Jones fell 1.2% on disappointing jobs data, leaving the index 1.1% lower on the reporting week to July 10. Pharmaceutical and biotechnology stocks were mostly lower over the week, with 24 of those tracked falling and 16 rising, but with no spectacular movements.

The best performance came from biotechnology major Genentech, which moved up 5.9% ahead of reporting second-quarter 2006 results, on the expectation that these would be good. However, when the figures were released on July 11 (see page 3), despite a thundering 79% rise in net income, they disappointed, causing the stock to fall. Gilead was up 3.9%, after the company revealed that a new combination AIDS drug, including two of its compounds, would soon be released. This news also benefited Bristol-Myers Squibb on July 10, although this stock was down 1.4% on the reporting period. The week's worst performer was Vivus, with a 9.9% decline. According to Forbes magazine "gurus" cashed out of Vivus, the Mountain View, California-based specialty pharmaceutical company developing trial compounds for the treatment of male and female sexual dysfunction. The stock spiked to a 52-week high of $5.60 on May 11 after positive results from its Phase II trial of the obesity drug Qnexa (phentermine and topiramate; Marketletter May 22). Since then, enthusiasm has subsided and the stock fell to nearly $3.00. Investors took the chance to sell a rally up to around $3.80 last week, noted Forbes.

Meantime what is seen as poised for recovery is the biotechnology sector, where revenues - especially for expensive cancer drugs - are matching or beating estimates. Some analysts feel that Genzyme (down 4.2% on the week) could see an upside surprise due to prescription growth, while others are more cautious about Amgen, up 1.3%, which has had a disconnect between past data and sales expectations. Patience on Amgen is advised by some.