Stock Commentary - New York week to May 19, 2008

NEW YORK: equities moved up for three and down for two of the reporting days to May 19, leaving the Dow Jones 1.2% higher overall and just breaching the psychologically-important 13,000 level, albeit that this was lost the next day. Financial sectors continued under pressure, but there was moderate inflation data. Drug and biotechnology stocks were generally stronger, with 23 of those tracked seeing a gain, 14 dipping and one unchanged.

Medarex stock, up 16.8% for the week, took off as the company released new ipilimumab (MDX-010) and melanoma abstracts ahead the American Society of Clinical Oncology meeting. Pointing to its pipeline and expected good news this year and next relating to internal and partner programs, Mark Monane of Needham & Co. has upped his rating on the stock to buy from hold. However, Jason Kolbert of Susquehanna, who rates the stock as neutral, feels there is nothing new or exciting in the abstracts. "Prolonged survival," is still the key to approval, he feels. Valeant shares ended the week up 5.5%, on positive trial results for retigabine. The company plans to file for approval in the USA and the European Union by year's end. There was other good news for the company; the Food and Drug Administration has entered an administrative order to stay the approval of Spear's generic fluorouracil cream 5% (the generic of Valeant's Efudex topical cream) until May 30 because of what it called "outstanding questions" regarding the clearance. Generics, the bane of the brand name drug sector, are running into some problems of their own. After calling first-quarter earnings for copy drugmakers mostly "disappointing," Randall Stanicky of Goldman Sachs has downgraded that sector, noting that there are few new generics likely to hit the market for the rest of the year. Consolidation is in the future, he feels, with four to five global leaders emerging in the next few years. Mylan, up 6.9% on the week, is one of the two companies he does not rate as neutral, giving it and Teva a buy. Despite the fact that Mylan's 2008-2010 earnings outlook is lower than expected, he is looking to 2010, when cost reductions from the merger of Merck KGaA's generic unit kick in. His price target of $17 means an almost 47% upswing.