Stock Commentary - New York week to Nov 5, 2007

NEW YORK: equities moved up and down - though mostly the latter, in the reporting week to November 5, leaving the Dow Jones 2.4% lower overall. The period was impacted by investors waiting to see if there would be an interest rate cut, which there was, but they were also concerned about the negative housing market and US economy, with the return of fears on the subprime mortgage market. Pharmaceutical and biotechnology stocks were mostly lower, with losers outpacing risers more than three to one.

Vertex and Valeant saw their share prices plummet during the reported week. Vertex lost over a quarter of its value, 26.9%, on fears of competition for telaprevir from Roche and Romark. Both Leerink Swann and Rodman & Renshaw cut the firm to market perform from outperform, with the former also lowering its price target to $30 from $43-$45 on an expected additional drop. Rodman & Renshaw analyst Navdeep Jaikaria voiced concerns to clients that the Food and Drug Administration may ask Vertex to complete 48 weeks of treatment for the control arm in its Phase II testing of the drug. The firm did release positive news in an interim analyses of two Phase IIb trials of the hepatitis C candidate. Valeant shares fell 28.4%, hitting a four-year low, after Bear Stearns downgraded it to underperform from peer perform and lowered estimates on the stock because of declining royalties and product sales growth. The company blamed its third-quarter loss (see page 10) on competition for ribavirin in Japan and Europe, as well as the loss of ribavirin royalties from Roche. With Vertex putting Infergen (consensus interferon/interferon alfacon-1) up for sale, growth is expected to be in the low single digits. Millennium shares were up 9.6%, with the firm raising its sales forecast for Velcade (bortezomib) $15.0 million to $265.0 million and forecasting a larger-than-expected adjusted profit. Jim Reddoch of Friedman Billings Ramsey upgraded the stock to outperform from market perform and raised his price target by $6 to $16, noting that the drug is likely to become the primary treatment for multiple myeloma, but Morgan Stanley feels that though its sales were stronger than expected, they will come under pressure.