Stock Commentary - New York week to Oct 13, 2008

NEW YORK: equities were again rocked by the ongoing global financial crisis in the reporting week to October 13. Despite an 11.1% leap for the Dow Jones Industrial Average on the last day, after the government elaborated its rescue package for the troubled sector, the index was still down 5.7% week-on-week and even falling well below the critical 9,000 level. Drug and biotechnology stocks, often seen as safe havens and defensive stocks in times of turmoil, failed to live up to expectations, with only 11 of those tracked seeing a rise and 25 falling over the week.

ArQule was a major exception, having fallen sharply the previous week, rising a massive 27.2% as investors digested the positive news of it achieving a clinical milestone in its development of ARQ 197. Medarex also saw a strong rebound on no particular news. Going into seriously negative territory was Affymetrix, which plunged 30.6% after it revealed that its third-quarter 2008 revenues would be in the $75.0-million range, well below analysts consensus expectations of over $90.0 million. The firm's president, Kevin King, said a complete analysis of the shortfall will be completed over the coming weeks, and he will discuss with investors/analysts what specific actions will be taken to improve operating results. ImClone was virtually unchanged, despite the $70 per share offer for the company from drug major Eli Lilly (Marketletter October 13), which was a lot higher than Bristol-Myers Squibb's earlier $62 and has been accepted by the biotechnology firm's board. Lilly fell 6.7% over the week, while B-MS drifted 1.7% lower. According to Motley Fool's free investing community intelligence service, B-MS has earned a respected four-star ranking, and is expected to outperform the Standard & Poor's going forward. The firm is seen as profitable, with a much above average dividend and a potential takeover target because of its strong pipeline. Biogen Idec was off 4.6% on the reporting period. However, it seems that analysts largely ignored the news that it is dropping development of an investigational new arthritis drug, baminercept (see page 21), saying it had not been a factor in models for future revenues, according to a report from the Associated Press.