Stock Commentary - New York week to May 7, 2007

NEW YORK: equities notched up gains throughout the reporting period to May 7, maintaining the good momentum after the Dow Jones breached the psychologically-important 13,000 mark the previous week. Sentiment was boosted by good first-quarter earnings reports and stronger-than-expected factory orders. Also, the US dollar retreated from its record low against the euro. Pharmaceutical and biotechnology stocks were also in favor, with 29 of those tracked rising, just seven falling and one unchanged.

Good earnings figures for Watson and a statement that it expects a larger adjusted profit in 2007 (see page 10) prompted Ricky Goldwasser of UBS to upgrade the stock to buy from neutral. The stock was up 13.4% for the reported week. ImClone's first-quarter figures were all right (Marketletter May 7), but what has moved the stock is optimism that things look good for Erbitux (cetuximab), which had expected pressure from Amgen's Vectibix (panitumumab) that evaporated as the competitor failed to show a survival advantage in one colorectal cancer clinical trial and Erbitux having a positive result in a similar trial. More clinical data will be available next month, too. Vectibix revenues were up in the past quarter, but ImClone plans to boost its Erbitux sales force more than 50%, as a vote of confidence in the drug. ImClone stock was up 7.9% for the week. Although it reported a profit, investors were not pleased with Valeant's first-quarter figures. The company noted that its earnings were impacted by a significant reduction in sales in Mexico and by lower sales of Infergen (interferon alfacon-1) and Efudex (fluorouracil) in the USA. The firm said the Mexican sales were a transitory issue brought about by two wholesalers, but the stock still fell 8.8% for the week. Schering-Plough moved 4.2% higher, after Prudential analyst Tim Anderson increased his rating for the firm on its planned acquisition of Organon Biosciences from Dutch group Akzo Nobel, which had at first been seen to be at a high price (Marketletters passim). Bristol-Myers Squibb stock, up 4.3% for the week, was upgraded to buy from hold by Deutsche Bank, which set a $35 price target, after its first quarter showed a recovery (Marketletter May 7).