Stock Commentary - New York week to June 16, 2008

NEW YORK: equities moved up and down during the reporting period to June 16, leaving the Dow Jones a barely changed -0.1% overall. There was particularly negative sentiment on June 11, again knocked by galloping oil prices, although this was followed by an upswing on slightly improved retail sales figures and a dip in crude along with moderate inflation figures. Drug and biotechnology stocks were mixed, with 18 rising and a similar number falling, mostly in a fairly narrow range. While some drug analysts feel there are now good values in the sector, most investors do not agree. Tim Anderson of Sanford Bernstein feels Schering-Plough, down 2.3%, with late-stage products, is one company that could do well, as others such as Pfizer (-1.4%) and Eli Lilly (-0.7%) will suffer through loss of patents. It is the same litany of problems for the sector: rising costs, loss of patents, generic competition and lower returns. Merck & Co drifted down through most of the week to end with a 5.4% decline on no particular news.

PDL BioPharma shares were up 4.5%, with the stock still showing some benefit from its management restructuring. However, two analysts at Credit Suisse have downgraded the company to neutral from outperform, telling clients that its price has hit their fair-value estimate and price target of $11. They also reminded clients that the company is now working on separating the royalty and the biotechnology pipeline assets, so that there will be two entities trading independently by the end of the calendar year (Marketletters passim). An estimate of $11-$12 per share is a fair value range for the sum of all the assets within the company currently, they explained. Amylin shares have been up and down, but ended the reported week off 0.2%. The stock had fallen on positive data for liraglutide, a possible competitor for Byetta (exenatide), but then bounced back on positive results for exenatide LAR. Jim Reddoch of FBR Capital Markets waxed ecstatic about the once-weekly version of Byetta to clients, adding that it should become the drug of choice for type-2 diabetes patients once it is available. Even with competition, he feels the drug will have peak annual sales of $2.0 billion. However, other analysts remain more cautious.