Stock Commentary - New York week to Jan 9

NEW YORK: equities started the three-week reporting period to January 2 in positive mode, on dovish remarks from the Federal Reserve Bank, then drifted around to end in negative territory, with the Dow Jones a slight 0.3% lower overall. Bond market developments raised uncertainty about the US economy in the last trading week of 2005. January 2 was a holiday. Drug and biotechnology stocks were mixed with 22 of those tracked falling and a like number rising.

Of the drug majors, Pfizer, which ended up 11.4%, also boosted the drug sector as a whole on December 19 after its important patent battle win on Lipitor (atorvastatin) against India's Ranbaxy (see page 5). Pfizer also cheered investors by raising its dividend 26% to $0.24, after its recent stock slide. Merck & Co, which rose 12% over the period, was helped by its cost-cutting plans and R&D presentation, aimed at regained drug sector leadership (see page 3) as well as Pfizer's victory, as it too is facing patent challenges. Additionally, Morgan Stanley raised its price target on Merck's stock to $32.28. Also benefiting for the same reason was Bristol-Myers Squibb, up 7.7%. Medarex' stock rocketed 36.6% on speculation the company might be bought following Amgen's acquisition of Abgenix, as both Medarex and Abgenix are developing cancer-antibody agents in partnership with larger drug companies. Ken Kulju of Credit Suisse First Boston has maintained his neutral rating on Cephalon, which rose 16% on the reporting week, after the firm, along with Alkermes, received an approvable letter for Vivitrol (naltrexone). The firms plan to debut the alcohol dependency drug in the second quarter of this year. Sales in 2006 should be $30.0 million, ramping up to around $77.0 million in 2007, he said.

Looking to the new year, Al Rausch of AG Edwards expects that drug companies will benefit from implementation of the new Prescription Drug Benefit Plan, which will significantly reduce political pressure to introduce a program that allows drug reimportation. He also expects a continued heightened concern over drug safety and more "black box" warning requirements from the Food and Drug Administration.