Stock Commentary - New York week to Oct 30, 2006

NEW YORK: equities started the reporting week to October 30 edging up for three consecutive days on strong third-quarter earnings reports, then fell on worries about the US economy, but still ended with the Dow Jones holding the 12,000 level which it had attained the previous week. Drug and biotechnology stocks were mostly lower, with 26 of those tracked falling and 15 rising. The November 7 election could mean bad news for the industry if the Democrats gain control of Congress. The Democrats have made overhauling Medicare Part D their first priority to allow the government to negotiate Rx drug prices, should they win big in the midterm elections. The industry has donated more money ($8.7 million as of September) to political campaigns than it did during 2004, a presidential election year.

Ahead of a meeting on liver diseases, Vertex released positive news from an early-stage clinical trial of its hepatitis C drug candidate VX-950 (telaprevir), along with pegylated interferon and ribavirin. Patients using the three-drug combination had no trace of the virus in their systems even after stopping therapy; a combination of VX-950 and peg-interferon helped suppress wild-type and resistant variants of hepatitis C. The stock was up 18.5% for the reported week. Results that were a bit above estimates pushed Affymetrix shares up 14.3% for the week. Although one analyst issued an upgrade, others were not so positive. Derik De Bruin of UBS upped his rating on the stock to neutral from reduce, and noted that the business may be hitting a bottom point. He feels business will improve in the microarray market, that the company's new 1-chip 500K genotyping array will sell better than previously expected, and that margins will improve. Though he upped his price target $1.50 to $20 (a drop from this week's closing price) and raised his 2006 projection to a loss of 13 cents from 15 cents, Ross Muken of Deutsche Bank kept his hold rating on the stock. Barr Laboratories, which was down 5.4%, closed its acquisition of Pliva during the reported week. The US Federal Trade Commission, fearing lack of competition and higher prices, has said that it must sell or divest four generics to get approval (Marketletter October 30).