Stock Commentary - Europe - week to Oct 2, 2006

NEW YORK: equities started the reporting period to October 2 in bullish mood, helped by better-than-expected economic data and strong earnings forecasts, reaching a six-year high on September 28, but then slipped, as analysts viewed the markets as over-extended, with the Dow Jones closing the week 0.8% higher. Drug and biotechnology stocks were mixed, with 20 of those tracked rising and 21 falling.

Vertex Pharma rose 7.6%, on an upgrade from Merrill Lynch, which also helped the biotechnology sector on September 28. ImClone, down 5.7% on the week, lost ground after Amgen said it had gained fast-track review status for its colon cancer drug Vectibix (panitumumab; see page 20), which is a likely rival for the former's already-marketed Erbitux (cetuximab). However, Amgen also fell, closing the week down 1.3%, after Credit Suisse initiated coverage of the stock with a price target of just $65.00. Of the drug majors, Merck & Co gained at the start of the reporting period, on news of another Vioxx (rofecoxib) law suit win (Marketletter October), but then drifted back to close 0.7% lower. Gilead Sciences slumped 6.5% on October 2, after it announced that it is to buy Myogen for $2.5 billion (see page 3), at a premium of 50% to the latter's trading price, which some observers felt was steep. Gilead stock ended the week 2.9% lower. Genentech increased 6.6% over the week, despite falling $1.17 to $82.20 on September 28 after IMS Health cut its sales forecast for the firm's Avastin (bevacizumab). Biogen Idec was down 1.1%, despite rising on the news of good clinical data on its Tysabri (natalizumab; see page 22), showing the drug helped reduce cognitive degeneration in multiple sclerosis patients.