Stock Commentary - New York week to Sept 17, 2007

NEW YORK: saw a broad-based rally at the start of the reporting period to September 17, helped by comments from Federal Reserve Bank chairman Ben Bernanke, but this lost steam as crude oil prices rose to a record high of over $80 a barrel. However, stocks recovered, leaving the Dow Jones up 2.1% on the week. Pharmaceutical and biotechnology issues were mixed, with 18 of those tracked rising and 21 falling. Biotechnology shares fared well ahead of the weekend, after analysts at Lazard Capital markets initiated positive coverage on several companies in anticipation of good clinical research data.

After a Food and Drug Administration panel said more warnings were not needed on Amgen's Aranesp (darbepoetin alfa) and Epogen (epoetin alfa), the stock hit a six-week high and was up 8.7% for the reported week (Marketletter September 17). A few weeks earlier, the stock also had good news when the Senate asked the Center of Medicare and Medicaid Services (CMS) to quash a decision to get tougher on reimbursements for the two drugs, though, at the time, analysts were unsure if the agency would take action on the request. This time, Merrill Lynch upgraded to a buy rating on the stock and UBS went from sell to neutral. Even so, a Citigroup analyst feels Aranesp sales could drop 69% because of the reimbursement changes he says will go into effect as planned, though he noted that expense cuts, many in the form of already announced layoffs, would offset the loss. The firm has a hold rating on the stock and has cut the target price to $59 from $60. King Pharma stock was off 14.4% for the week after a court ruling that said its patent claims for Altace (ramipril) were invalid. The decision opens the way for Indian drugmaker Lupin to market a generic of the drug. King plans to file for a rehearing on the decision by the Appeals Court; a lower court earlier had ruled in favor of the US firm and its marketing partner, French drug major Sanofi-Aventis. The disputed patent runs through October 2008, but analysts now feel a generic could be on the shelves before year-end. After earlier positive results in a Phase III trial on an Altace combination product, the company said it would file an New Drug Application in the second half of this year.