Stock Commentary - New York week to May 26, 2008

NEW YORK: equities, having just reclaimed the important 13,000 level on May 19, moved sharply lower for nearly all of the holiday-shortened week to May 26, leaving the Dow Jones with a 4.2% decline. Blamed for the lack of investor confidence, was the continuing advance in crude oil prices and a rise in core inflation figures. This was followed by news that the Federal Reserve Bank planned no further interest cuts but projected higher inflation and unemployment. Pharmaceutical and biotechnology stocks were mostly lower, with 11 of those tracked seeing a rise and 27 a fall.

Nearly doubling its stock price, Vivus shares soared 44.9% for the week on the publication of an abstract of positive interim data for a mid-stage study on Qnexa (phentermine topiramate), with a lead indication for obesity; the abstract will be presented at the forthcoming American Diabetes Association conference. Rodman & Renshaw set an $11 price target on the stock and RBC Capital Markets chose $8 as its target. Cannacord Adams upped its rating on Vivus to buy from hold and also boosted its price target to $10 from $5.70. Some analysts have noted that, since the company recently filed for a $150.0 million stock offering, there could be serious dilution. Nevertheless, they feel the drugmaker's financials are evidence it can handle the new capital. After Barr Labs got approval to sell a generic version of Bayer-Schering's Yasmin (drospirenone and ethinyl estradiol; Marketletter March 10), Ken Cacciatore of Cowen upgraded the stock to outperform from neutral. He feels the US company could have exclusive generic rights to the drug until 2010. Barr will also soon start selling generic Adderall (amphetamine/dextroamphetamine) XR, which would have a bigger-than-expected market, he noted, adding that generics for Allegra (fexofenadine HCl) and Yaz, a low-dose variant of Yasmin, are likely. Meanwhile, Zacks downgraded the stock to sell from hold after the company posted disappointing first quarter results and cut its full-year outlook. Calling the coming quarter "challenging," Zacks said that, even though the generic pipeline has a lot to offer, first-quarter copy product sales were a major disappointment.