Stock Commentary - New York week to March 5, 2007

NEW YORK: saw the Dow Jones plunge 3.3% on February 27, after a more than 9% slump in China's main stock market, as well as others in Asia and, despite reassuring comments from Federal Reserve Bank chief Ben Bernanke seeing it rise slightly the next day, continued in negative mode for the rest of the reporting period to March 5, to see the index down 4.6% overall. Pharmaceutical and biotechnology stocks plunged along with the indexes. Even Merck & Co, which gained on March 28 after it raised its earnings forecast, saw a decline, albeit of just 0.5%. Merck's move was in response to better-than-expected product sales and a blow to Novartis' upcoming competitor to the US drugmaker's diabetes drug Januvia (sitagliptin; Marketletter March 5).

Although it may be hard to believe when looking at the consistently-negative numbers, the drug group actually did not fare so badly relative to other sectors. Pfizer's win in a patent dispute with Mylan over Norvasc (amlodipine) and a Food and Drug Administration approval for Abbott Laboratories' Humira (adalimumab) to treat Crohn's disease were among the positives. Abbott was off 3.2% and Pfizer fell 4.4%, while Mylan slumped 10.0%. The biotechnology sector, on the other hand, is seen as riskier than the "Big Cap pharma" and took a larger hit. Many analysts feel this was just a hiccup and that the good stories in the sector will help the group recover quickly. Amgen's 6.1% drop was compounded by news of a Securities and Exchange Commission inquiry over a claim it did not publicly disclose the side effect problems in a test of Aranesp (darbepoetin alfa). News of an upcoming FDA panel looking into the safety of anemia drugs and a potential competition from Roche has also hit the stock. Geoffrey Porges of Sanford C Bernstein has lowered his 2007 sales estimate 2% and earnings per share $0.04 cents to $4.34. Provigil (modafinil) could mean problems for Cephalon. The FDA has issued a warning letter relating to misleading claims about the drug, and Cephalon, (-8.1%) Mylan, Barr (-13.0%), Teva and Ranbaxy are being sued by a consumer coalition accusing them of a pay-off to keep a generic version of the sleep disorder drug off the market until 2011 or 2012.