Stock Commentary - New York week to Nov 12, 2007

NEW YORK: equities started the reporting period to November 12 with a rebound, after a dismal showing the previous week, as financial issues looked set to recover after their battering due to the subprime mortgage market problems. However, the next day the Dow Jones plunged 2.6%, as the dollar fell to its lowest level, and the index continued to decline, leaving it down 4.1% week-on-week as credit problems continued to be the focus. Drug and biotechnology stocks, with most of the third-quarter financial results now out of the way, were mostly lower, as 26 of those tracked fell and just 13 saw a rise.

Drug major Merck & Co was barely changed over the week, despite rising 2% on November 9, after announcing a $4.85 billion deal to settle law suits over its COX-2 painkiller Vioxx (rofecoxib; see page 2). The payout would amount to only nine months profit and would remove a large dark cloud looming over the company. Analysts seem to agree that the firm, which had an aggressive stance on litigation, has "gotten off easily," though the final settlement details need to be scrutinized. Cytogen, whose stock was off 12.9%, has hired an investment adviser for weighing up what it called "strategic alternatives" and for help in expanding its drug pipeline and maximizing shareholder value, though the company has said that the evaluation might not lead to any specific action. One analyst reported that the firm recently received a list of 300 products that could be licensed in the cancer category. One of PDL Biopharma's major shareholders, Third Point, has liquidated its stake in the company after being denied a board seat. While positive about the plan to sell the company, the Third Point chief executive was upset about being left out of the process. Although PDL reported better-than-expected third-quarter earnings per share, revenues were lower than expected. The stock fell 13.4% for the week. Gilead Sciences' shares fell on the news that potential heart problems could crimp GS 9190, an experimental hepatitis C treatment now in the very early stages of development that showed encouraging antiviral activity. A study looking at the potential cardiac risk should be completed before year-end. The stock was off 9.8% for the week.