Stock Commentary - New York week to March 3, 2008

NEW YORK: equities moved higher for the first two days of the reporting period to March 3, on stronger-than-expected producer prices in January. However, the situation reversed following weak Gross Domestic Product data and forecasts of an economic downturn from Federal Reserve chairman Ben Bernanke, leaving the Dow Jones 2.5% lower week-on-week. Pharmaceutical and biotechnology stock fared badly, with only nine of those tracked rising, 29 falling and one unchanged. When the economic outlook is cloudy, investors often turn to drug stocks as a safe investment. While calls for health care reform, poor pipelines, fading patents, generic competition, and fear of side effects are holding some investors on the sidelines, some analysts feel that the valuations in the sector have built in all of the bad news but none of the potential positives. Among the down-beaten stocks that are getting some analysts' attention are Schering-Plough, down 2.5%, which, despite falling on a poor Vytorin (ezetimibe and simvastatin) study, should see some positives from its purchase of Organon BioSciences; and Merck & Co (-5.8%) also hit by the Vytorin study, has strong heart and diabetes franchises.

Some negative data on UK major GlaxoSmithKline's Epzicom (abacavir and lamivudine) could lead the Food and Drug Administration to remove the drug from its Rx guidelines, leaving Gilead's Truvada (tenofovir and emtricitabine), as the sole preferred AIDS treatment in its category, according to Jim Reddoch of Friedman, Billings, Ramsey who kept his outperform rating on the stock, but raised his price target by $3 to $57. He feels the drug could see sales increase about 7% through 2011, and expects 2008 US turnover to hit $927.0 million, up from $866.0 million. The stock was 11.3% higher. Falling 12.3%, Mylan shares hit their lowest level in almost six years after reporting a fourth-quarter 2007 loss and because of concerns about the possible sale of its Dey LP unit, which could slow the launch of Perforomist (formoterol fumarate) and cut into profit for the next three years. Amylin shares were off 10% after the FDA posted proposed changes for diabetes studies that some analysts feel could delay approval of a long-acting version of Byetta (exenatide).