Stock Commentary - New York week to May 5, 2008

NEW YORK: equities moved in a narrow range on most of the five reporting days to May 5, with the exception of May 1, when the Dow Jones leapt 1.5% to reclaim briefly the 13,000 mark for the first time since early this year. With nearly all of Europe closed for a May day holiday - and Japan in the midst of its "Golden Week," most of the action that day was in the USA. However, the index backed off on the last day, amid worries about oil prices which had hit $120 a barrel and lost the psychologically-import level. Pharmaceutical and biotechnology stocks were mixed, with 19 of those tracked rising and an equal number falling, with one unchanged over the week.

Genentech took more of a hit than Biogen Idec on the news that Rituxan (rituximab) had failed in a later-stage trial for systemic lupus, though the company is still running a separate trial for testing the drug against lupus nephritis. It also recently failed in trials for multiple sclerosis. While the drug's sales for non-Hodgkin's lymphoma and rheumatoid arthritis are not affected, the failure could portent bad news for Genentech's second-generation products. It also lowers the total potential for Rituxan, knocking off at least $300.0-$400.0 million in potential sales the firm needs as its product line matures. Genentech shares were off 7.3% while Biogen Idec declined only 2.6%. Ligand shares plunged 11.8% after the company reported a loss of $3.9 million, or $0.04 per share, in its first quarter of 2008, compared with net income of $274.3 million, or $2.72 a share, a year earlier. Bristol-Myers Squibb's plan to sell its ConvaTec unit (see page 28) helped Steve Scala of Cowen repeat his outperform rating on the company, which he feels will hit the high end of its guidance for this year. The company's restructuring plans also include selling part of its Mead Johnson Nutritional business. Noting the firm will likely top its guidance, Seamus Fernandez of Leerink Swann has repeated his market perform rating. The stock was up 4.9% for the week. Merck & Co fell 5.9%, having suffered some disappointments on drug approvals (Marketletters passim) but the news that it was to lay off some 1,200 sales staff came too late to impact the current week's performance.