Stock Commentary - New York week to Sept 29, 2008

NEW YORK: equities experienced another roller-coaster week in the reporting period to September 29, as the US government made strenuous efforts to try to stabilize the financial markets with a proposed $700.0 billion bail-out. This was rejected by Congress on September 29 leading to a 7.2% slump in the Dow Jones after the vote, the biggest one-day fall, and the index down 5.9% on the week. Pharmaceutical and biotechnology stocks fared quite badly, with just 10 of those tracked rising and 26 seeing a fall. The continuing financial drama, while leaving investors unclear about where to put their money, may have solved one dilemma for those who are, even reluctantly, staying in the market. The general thought is that, post-election, regardless of who wins in November, there will be no money for any major overhauls to the health care system. The prevailing thought seems to be that minor tweaks will not drastically affect the health care industry. So the sector looks like it could once again be a defensive play, especially in an environment where industries such as energy have major economic sensitivity, though investors and analysts alike agree that decisions have to be made on a stock-by-stock basis.

In a difficult market, good news can make all the difference. Vertex was one of the few in the sector whose stock ended up, and in double-digits, too. The shares rose 19.3% and are trading higher on the news that patients taking its hepatitis C drug telaprevir can get the same benefits from taking it twice a day in higher doses as they do with lower doses three times a day. Investors seem willing to deal with its dilutive share offering because of the size of the worldwide hepatitis C market. PDL Biopharma, on the other hand, continued to slide as investors pulled their money out on negative news about royalty payments for a Crohn's drug and a downgrade from JP Morgan. PDL has named a new chief executive for the planned spin-off of its biotechnology assets that will be accomplished by the end of the year. The stock was off another 6.5% during this reported week. Ligand was down 13.7%, after the firm revealed it is buying Pharmacopeia in a deal valued up to $70.0 million in a stock-for-stock exchange (Marketletter September 29).