Stock Commentary - New York week to May 11, 2009

NEW YORK: equities experienced a roller-coaster ride in the reporting period to May 11, waiting for the outcome of "stress tests" for banks,  the results of which were largely positive and saw the Dow Jones leap  nearly 2% ahead of the weekend, but fall again on the last day, leaving  the Index barely changed overall. Pharmaceutical and biotechnology  stocks were mostly higher, with 23 of those tracked rising and just 13  falling. The sector benefited minimally from comments made earlier in  the reported week by a Republican, who indicated that US health reform  will have some bipartisan support, which could help allay what was  expected to be greater pressure on drug prices. Companies have been  concerned about new products passing a cost-benefit test to get  coverage under Medicare. On the plus side was a proposal in President  Obama's fiscal 2010 budget plan that would provide added funding for  drug oversight since it might cut Food and Drug Administration drug  review time. A possible cloud is a proposal to increase the effective  tax rate on firms with large overseas earnings.

Valeant, which leapt 14.4%, posted first-quarter results that beat  analysts' expectations and also raised its outlook for the year. The  firm is paying $28.0 million to acquire EMO-Farm of Poland (see page 3),  which also gives it entry into Central Europe. The company plans to  launch EMO-Farm's anti-infective cream in 2010. There was also a sharp  14.2% rise for Alnylam, despite the firm posting greatly increased  losses (see page 4), helped by the previous week's news of a licensing  deal with Isis, which also saw the stock rise 11.5%. First-quarter  profits and revenue for Celgene beat expectations, but that was not  enough to outweigh concerns over sales for Revlimid (lenalidomide)  and its spending on research. Credit Suisse said it wanted to wait for  what it termed "better visibility" on Revlimid and downgraded the  biotech company to neutral from outperform. Celgene's exposure to  health care reform was cited by Goldman Sachs as the reason it  downgraded the firm to sell from neutral. Nevertheless, the stock was up  6.3% for the week. Goldman Sachs also downgraded the  large-capitalization biotechnology sector to neutral from attractive.