Stock Commentary - New York week to May 1, 2006

NEW YORK: equities meandered around during the reporting week to May 1, hitting a six-year high ahead of the weekend, but closed with the Dow Jones just less than 1% higher. Market sentiment was helped by Federal Reserve Bank chairman Ben Bernanke hinting that there would likely be not much more in the way of interest rate hikes and a strong crop of first-quarter financial results. Pharmaceutical and biotechnology stocks were mixed, with 19 of those tracked rising and 23 falling and with the drug majors moving in a narrow range. Although sales for the large-capital drug stocks were slow overall, earnings per share growth was good because of lower costs and taxes, as well as boosts in gross margins, according to Wall Street watchers. There are few black clouds from Washington on the horizon either, they add, therefore the near-term earnings outlook for the sector is good.

Allergan, up 4.2%, saw good news in the positive reports that its adjustable weight-loss bands, implanted around the stomach, are better than behavioral weight-loss treatments for the mildly obese. The bands were implanted in 20,000-30,000 patients in the USA last year and the market may grow to 300,000 in 2010, it was noted, and Johnson & Johnson, which rose 0.4% on the week, is expected to win approval next year for a competing band product. Ronny Gal of Sanford C Bernstein said the bands had sales of $131.0 million in 2005, and should bring in $173.0 million this year. Allergan was raised to buy from neutral by Gregory Gilbert at Merrill Lynch, who put a 12-month price target on the stock at $117. Several smaller companies did not fare as well, with Amylin dropping 9.4% after its figures did not meet expectations. The good news and the bad news is that there has been a supply squeeze for its Byetta (exenatide) treatment, it was noted. Thomas McGahren of Merrill Lynch has kept his Byetta sales estimate at $372.0 million on total revenue of $442.0 million, but Jim Reddoch of Friedman, Billings, Ramsey analyst, who rates Amylin's stock as outperform sees the supply constraint as a short-term growing pain for Amylin. Gilead Sciences dropped 8.9%, on its announcement of a $1.3 billion sale of convertible senior notes.