Stock Commentary - New York week to April 24, 2006

NEW YORK: equities started the reporting week to April 24 strongly, fuelled by good first quarter earnings reports and, despite taking a breather on the last day, the Dow Jones ended the period with a 2.3% rise. Additionally helping market sentiment were indications from the Federal Reserve Bank that it is close to calling an end to the interest rate-tightening cycle. Financial results (Marketletter April 24 and company pages this issue) also helped the pharmaceutical sector higher, with 25 of the drug and biotechnology stocks tracked rising, 15 falling and one unchanged.

One casualty of results reporting was Amgen which fell 4.1% on the week, after its 22% earnings per share rise failed to please investors. ImClone moved up prior to its earning report, rising 10.3% on the week. After the close of the reported week, the company said its first-quarter profit had jumped significantly because of a tax benefit and a milestone payment from marketing partner Bristol-Myers Squibb, and also on the strength of Erbitux (cetuximab) sales. The company also benefited when a group led by billionaire investor Carl Icahn increased its holdings in the company. Affymetrix' problems continued as costs have spiraled out of control; investors were not pleased with first-quarter results either, and the stock plunged 13.3%. Analysts note that even though the firm has a near monopoly in its gene expression products, and exceptional growth prospects in the genotyping market, company management may not be capable of running a group of this size. Despite moving up 8.2% during the reported week, Vertex posted a wider first-quarter loss after the week's close, with revenue growth offset by increased R&D expenses. Some analysts have noted that the company is a bad bet, with what they call a promising pill that has yet to be shown to treat hepatitis C, and a number of other drugs under development. Revenue in 2005 was just $161.0 million, only $8.0 million more than in 2000, and much of it a result of research contracts from big pharma. ICOS, down 2.8%, is also looking like a non-starter, analysts point out. The firm had a net loss of $74.8 million last year on revenue of $71.4 million, and has posted 15 straight annual losses.