Stock Commentary - New York week to July 21, 2008

NEW YORK: saw a dismal start to the reporting week ended July 21, dropping below yet another psychologically-important level, 11,000, on returning concerns for the financial sector, but then the Dow Jones leapt sharply as a batch of better-than-expected second-quarter results started coming through and crude oil prices dipped, leaving the index 3.7% higher over all. Pharmaceutical and biotechnology stocks were mostly higher, with 28 of the tracked issues rising and nine falling.

Of the drug majors, Schering-Plough took a battering, falling 11.4%, mainly as a result of negative findings from the SEAS study on the cholesterol drug Vytorin (ezetimibe and high-dose simvastatin; see page 19). S-P's partner for the drug, Merck & Co, was less affected, falling just 4.2%. Barr Labs' stock rocketed 44.6% on the Teva takeover news (see page 5), but Michael Tong of Wachovia lowered his rating on the US firm to market perform from outperform, feeling there could be problems integrating the two operations. He also lowered his rating on Mylan, which he feels could be forced into making an acquisition to compete, and on Watson, whose growth he feels remains doubtful despite some good recent quarters. Mylan was up 8.5% for the week and Watson rose 2.9%. The bid by Roche to buy the remaining shares of Genentech helped to advance not only that company's shares by 24.5% as investors expected the bid price to increase, but also those of other biotechnology firms as mainline pharmaceutical groups look to that sector to replenish their pipelines, either through acquisition or internal development. Biogen Idec, which partners with Genentech on Rituxan (rituximab), bounced on the news and was boosted even further, up 9.6%, ahead of its quarterly earnings announcement, when Genentech said Rituxan sales were up 12%. Amgen, 4.3% higher, and Genzyme, up 3.7%, are also expected to be considered as targets. The dollar's weakness is another factor making the US biotechnology sector look attractive. Imclone, up 17.7%, which was a potential buyout target last fall, was helped both by the Roche bid and a hike in its price target by Citi Investment Research from $52 to $56.