Stock Commentary - New York week to Feb 6

NEW YORK: equities saw up and down movements in the reporting, week to February 6, boosted at times by strong earnings reports and falling at others despite strong retail sales figures and falling crude oil prices. The Dow Jones ended the period with a 0.9% fall. Drug and biotechnology stocks were also mainly lower, with 29 of those tracked falling and only 14 rising.

Leading biotechnology company Amgen ended the week 1.6% lower, despite a 4.3% rise on February 1 spurred by the news that Swiss firm Roche's potential competitor for Epogen (epoetin) would be delayed (see page 23). Allergan dropped 4% on the week, although it posted strong fourth-quarter 2005 results (see page 26) but Chiron gained 3.4% on reporting a 12% sales rise and soaring profit-margins (see page 6). Wyeth was down 2% on disappointing results and Schering-Plough declined 5%, despite reporting a strong turnaround in its financials (Marketletter February 6). John Boris of Bear Stearns has kept his peer perform rating on the company, but has revised his estimates downwards. He feels S-P's gross margins will be adversely impacted this year by the Integrilin (eptifibatide) royalty payments, underutilized manufacturing capacity and the growth of low-margin products, and a lower earnings per share estimate for next year reflects an increased tax rate and higher operating expenses. Tim Anderson of Prudential Financial still has an overweight rating on the company, but has cut his estimates and set a target price of $23. An upgrade by Michael Tong of Wachovia Capital Markets to outperform from market perform, as well as a good quarterly earnings report, boosted Mylan stock, which rose 8.8%. The firm's core generic drug business has stabilized, it has cut costs and it has potential to expand its gross profit margins, according to Mr Tong, who added that Mylan's stock price was attractive. Amylin plunged 10.8%, but Piper Jaffray's Thomas Wei says that investors are making too much of potential competition for the firm's diabetes drug Byetta (exenatide) and says he is keeping his outperform rating on the stock and a $50 price target. The growth and size of the diabetes market will absorb multiple new entrants, he told clients.