Stock Commentary - New York week to Sept 3, 2007

NEW YORK: equities started the Labor-day holiday-shortened week to September 3 with one of its worst losses, when the Dow Jones slumped 2.1%, on gloomy housing sector news. However, this mood was reversed by comments from Federal Reserve Bank chief Ben Bernanke, suggesting he would act if necessary if the US economy is threatened. The index closed up a modest 0.3% ahead of the weekend. Pharmaceutical and biotechnology stocks were mixed, with 19 of those followed rising and 20 falling.

PDL Biopharma's announcement that it will refocus on cancer and select immunological diseases, and sell its commercial assets (see page 5), did not sit well with analysts, and the stock fell 17.5% overall. Kimberly Lee of Pacific Growth Equities has downgraded the stock from buy to neutral, and reduced her target price from $29 to $21. JP Morgan downgraded the stock from overweight to neutral. Some also feel the company could become a potential takeover target. Lazard Capital Markets, however, reiterated its buy rating and raised its estimates, though it did cut the target price from $30 to $25. PDL's new strategic plan means a significant decline in expenses, they noted, adding that they have upped the earnings per share estimate for 2008 from $0.55 to $0.96. King Pharmaceuticals' shares were off 4% after the company and its partner, Palatin, said they were delaying late-stage trials for bremelanotide, an erectile dysfunction product. The Food and Drug Administration has questioned the product's efficacy and its use as a first-line treatment, and also noted health concerns. The firms now plan to review the agency's suggestions to see how best to proceed with the program. Noting a mid-stage trial for a promising prostate cancer drug, Michael King of Rodman & Renshaw kept an outperform rating on ImClone, up 6.8%, and a price target of $42. There now is no therapy proven to increase survival for patients with androgen-independent prostate cancer, he said, adding that about 20% of newly diagnosed prostate cancer cases are androgen-independent. Vertex rose 5.6% ahead of new clinical trial data on a hepatitis C drug and news it would meet with the FDA soon to talk about Phase III studies for VX-950.