Stock Commentary - New York week to March 31, 2008

NEW YORK: equities saw early gains on March 25 wiped out and then a constant decline in the Dow Jones until there was a small upward movement on the last reporting day, March 31, leaving the index down 2.3% over the week. Markets were helped on the final day by Treasury Secretary Hank Paulson revealing plans for shaking up the financial regulatory system. Drug and biotechnology stocks were mixed, with 21 of those tracked seeing a rise and 18 a fall.

Schering-Plough stock and that of Merck & Co took a hit after a panel of cardiologists at the American College of Cardiology meeting recommended that doctors reduce use of Vytorin (ezetimibe and simvastatin) and Zetia (ezetimibe) and return to more statin use following the release of new data indicating they were no better than generics in slowing heart disease progression (see pages 19-20). Cowen analysts lowered their rating on S-P to neutral, because of efficacy questions. Lehman also cut its rating on the stock to equal weight from overweight and slashed its price target to $20 because of the expected effect on the firm's earnings per share. S-P stock was off 28.1% and Merck was down 14.2% for the week. Vertex shares were up a whopping 33.5% for the reported week, after the company said preliminary results for a telaprevir study were "promising." Vertex stock had already received a boost recently from early data on an experimental drug designed to help treat cystic fibrosis. Jason Zhang of BMO Capital Markets told clients that the telaprevir data for patients who failed prior therapies is "very impressive" and reiterated his outperform rating on Vertex. "Encouraging" was the word used by Rachel McMinn of Cowen. Thomas Russo of Robert W Baird reaffirmed his neutral rating and a $24 price target, adding that the drug's upside potential may be several-fold greater if it can tap into the hepatitis C treatment-experienced group. Noting the stock is undervalued due to telaprevir, Brian Abrahams of Oppenheimer reaffirmed his outperform rating and raised his price target to $43 from $38, pointing to clinical advantage over possible competitor S-P's boceprevir. Mr Zhang feels that the latter's data is "not impressive," and there are other hepatitis drugs.