Stock Commentary - New York week to Oct 29, 2007

NEW YORK: after a dismal performance the previous week, equities rebounded in the reporting period to October 29, with the Dow Jones rising 2.2%, on positive sentiment to the many corporate third-quarter earnings that are now coming through. However, the index failed to regain the 14,000 level, with investors focused on Federal Reserve Bank deliberations of interest rates. Pharmaceutical and biotechnology stocks made a strong come-back, with 29 of those tracked seeing a rise and just 10 falling.

Though Schering-Plough and Merck & Co both showed strong sales from their joint cholesterol venture with Zetia (ezetimibe) and Vytorin (ezetimibe and simvastatin), Merck's overall quarterly results exceeded expectations somewhat while S-P's did not even hit forecasts (Marketletter October 29). S-P stock was up 9.4% for the week, having plunged 12.4% on release of its third-quarter figures, with some analysts noting that the recent pullback in its price has given investors a chance to buy into a company that is likely to have great growth for the next five years because it has little to worry about from generic competitors. Merck's shares were up a further 5.7%. Pointing to healthy third-quarter results because of strong sales of Atripla (efavirenz, emtricitabine and tenofovir) and Truvada (tenofovir and emtricitabine), RBC Capital Markets has reiterated its outperform rating on Gilead Sciences, raised its estimate for the company, and boosted the stock's target price from $45 to $50. Gilead recently presented new data from the Phase III Aries studies evaluating Letairis (ambrisentan) in patients with pulmonary arterial hypertension. It also said it will buy back $3.0 billion of its common stock through December 2010. Gilead's shares were up 8% for the week. The bloom was off Biogen Idec's stock, down 6.6%, just a few weeks after it put itself up for sale (Marketletters passim) when it reported third-quarter profit and revenue that fell short of Wall Street expectations (see page 6). The firm blamed the slow sales on what it termed a "soft" August; analysts pointed out that Biogen raised Avonex (interferon beta-1a) prices 6% in the USA in August, and also expressed some disappointment with Tysabri (natalizumab) sales.