Stock Commentary - New York - week to Oct 1, 2007

NEW YORK: equities moved gently higher for the first three days of the reporting week to October 1, with a small correction ahead of the weekend, before the Dow Jones burst into life on the last day, rising 1.4% and reaching an all time record of 14,087. The jump came despite ongoing credit market worries and an earnings warnings from Citigroup, and was fuelled by the Federal Reserve Bank's easing on monetary policy. Drug and biotechnology stocks largely joined in the buoyant mood, with the Amex Pharmaceutical Index up 1%, with the Amex Biotechnology Index inching 0.2% higher. Of the stocks tracked, 26 saw a gain while 13 suffered a decline.

The best performing stock over the reporting period was Mylan Labs, with an 8.3% rise, boosted by the completion of its $6.6 billion acquisition of the generics subsidiary of Germany's Merck KGaA announced in the spring (Marketletters passim). This is expected to see the US firm triple its size and make it a major player in the global generics market, despite the requirement by the US Federal Trade Commission for the group to divest five drugs. In conducting its investigation of the proposed acquisition, the Commission identified competitive overlaps in the US markets for several generic drugs, including: acebutolol capsules; flecainide tablets; guanfacine tablets; nicardipine capsules; and sotalol tablets. PDL Biopharma started gaining on the last reporting day when, under pressure from shareholder activists, it announced that it was putting itself up for sales (see page 28). Its shares were up 4% on the week. Valeant Pharma fell 6.4%, largely on profit-taking following its 5.8% rise the previous week. The stock was the subject of a hold rating from Lazard Capital Markets. Cytogen was the week's worst performer, plunging 21.2% on no particular news. Genzyme gained 2.8% on the week, having risen 3% on the last reporting day, ahead of a Bioenvision shareholder vote on the former's top bid of $5.60 a share (Marketletter June 4), which some investors have said is still inadequate. Among drug majors, Pfizer, up 1.8% on the week, gained 2% on the last day after receiving European Union approval for its HIV drug maraviroc (see page 28).