Stock Commentary - New York week to March 17, 2008

NEW YORK: equities rebounded strongly on the first day of the reporting period to March 17, with the Dow Jones leaping 3.6%, helped by Federal Reserve Bank moves to help shore up the financial markets. However, momentum declined in the face of the ongoing credit crunch, with the index again dropping below the psychologically-important 12,000 level and finally battered by news of the downfall of Bear Sterns and its rescue by rival JP Morgan at a tiny fraction of its former value. Drug and biotechnology stocks were mostly higher, with 23 of those tracked rising and 16 falling. While the pharmaceutical sector is usually seen as a safe place to invest in times of economic uncertainty, there is now some trepidation that the lack of insurance coverage, whether because of lost jobs or cutbacks in Medicare/Medicaid coverage for those at low income levels, could adversely affect drug sales. At the same time, IMS Health reported that overall sales growth in the US drug sector slowed 3.8% last year, compared with growth of more than 8% in 2006 (page 14).

Cytogen's merger agreement with EUSA bolstered its stock price, with shares up 22.83% for the reported week (Marketletter March 17). With the deal expected to close in the second quarter, the company issued what could be its last quarterly report as an independent company, with its loss of 15 cents per share a nickel under expectations. Analysts still are not happy with PDL Biopharma, which is cutting jobs and selling some of its most profitable products, among other moves, as it tries to develop the drugs in its pipeline and keep investors happy with better returns. Cynthia Lee of Pacific Growth Equities feels the company's long-term outlook is bleak; she has a neutral rating on the company. Jim Birchenough of Lehman Brothers, Joel Sendek of Lazard Capital Markets and John Sonnier of William Blair have all downgraded the stock, which was off 10.21% for the reported week. Edward A. Tenthoff of Piper Jaffray has upgraded Millennium stock, up 4.5% on the week, to buy from neutral and raised the price target to $16.50 from $15, based on positive study data for a drug cocktail that includes Velcade (bortezomib), noting an expanded indication would boost market share.