Stock Commentary - New York week to June 9, 2008

NEW YORK: equities started the reporting week to June 9 in negative mode, rose a sharp 1.7% on June 5 on better-than-expected jobs data, but plunged over 3.1% the next day as crude oil prices rose to yet another record high. The last day saw an element of stability, leaving the Dow Jones 1.8% lower week-on-week. The pharmaceutical and biotechnology sectors were relatively weak, with losers outpacing gainers by more than two to one. With the American Society of Clinical Oncology meeting out of the way, the current reporting period's focus became the American Diabetes Association meeting in San Francisco (see pages 19-20). There also seems to be a debate over whether the sector has hit bottom or not. Moody's feels the fundamental credit outlook for the US drug industry remains negative, because of patent expirations, slow product approvals and potential negative legislation. Others note the problems, but feel the current low valuations for many stocks means now is the time to get into the sector, since strong cash flow and marketing power that smaller companies covet will lead to joint ventures that will benefit both sides.

Data presented at the ADA meeting seem to indicate that Amylin's Byetta (exenatide) and its longer-lasting version Exenatide LAR will have tougher competition. Jim Birchenough of Lehman Brothers told clients that post-marketing data indicated Byetta is not as effective as it seemed in clinical trials, and that some benefits fade over time. Phil Nadeau of Cowen & Co and Salveen Kochnover of Jeffries feel Novo Nordisk's liraglutide and Roche's R1583 will offer a challenge to exenatide. Ms Kochnover downgraded Amylin to hold from buy and cut her price target to $33 per share from $47. The stock was off 14.3% for the week. The data on telaprevir provided positive movement for Vertex Pharma, up 15.8% for the week. Susquehanna Financial raised its target price from $31 to $37. The firm will use profits from the sale of future Lexiva (fosamprenavir) and Agenerase (amprenavir) royalties to fund its hepatitis C research (Marketletter June 9). Seeing it now has a flexible cash position, Susquehanna has raised its estimate for a 2008 loss per share from $2.92 to $2.91 and cut that for 2009 from $3.02 to $3.36.