Stock Commentary - New York week to July 3, 2006

NEW YORK: equities started the reporting period to July 3 in negative mode, as investors waited for the Federal Reserve Bank's decision on interest rates which, when it came with an expected 0.25% hike, saw markets leap and the Dow Jones rise nearly 2% on June 29 and end the week with a 1.7% rise on relief that the Fed's policy statements were less hawkish than many had expected. Pharmaceutical and biotechnology stocks were also generally strong, with 32 of those tracked rising and just 10 seeing a decline.

Of the drug majors, Merck & Co, up 4.6% on the week, benefited from the US Centers for Disease Control and Prevention (CDC) advisory panel's recommendation on the use of the firm's Gardasil (quadrivalent human papillomavirus virus vaccine) for use in the routine vaccination of girls to prevent HPV infection, as well as advise on chicken pox vaccine (see also page 18). ArQule's positive results in Phase I trials and the start of enrollment in Phase II trials for ARQ 501 (see page 28) saw the stock leap 27.3% on the week. The drug is being tested in combination with gemcitabine to treat pancreatic cancer; the company is also developing the compound in head and neck cancer and ovarian cancer. Cephalon shares saw a healthy 14.2% rise, after the company received an approvable letter for Fentora (fentanyl buccal tablets; see page 22); the letter said that no additional safety or efficacy data was needed. The company said it would respond to the Food and Drug Administration by the end of July, and also noted that Barr has invoked an option to have it make a generic of Actiq (fentanyl). The license says Barr will be responsible for all packaging and labeling. Megan Murphy of Lazard Capital Markets told clients that she expects Fentora to be launched in October. The letter, she said, is the best regulatory outcome for Cephalon and Fentora as it will allow the company to realize the full value of the Actiq franchise and does not allow the generic a headstart in the marketplace. It was an approval for Genentech's Lucentis (ranibizumab; see page 21) that boosted that firm's shares 4.7% during the reported week. The drug, priced at a hefty $1,950 per dose, is expected to offer stiff competition to OSI's Macugen (pegaptanib), marketed by Pfizer.