Stock Commentary - New York week to Mar 20, 2006

NEW YORK: equities moved steadily higher for the first four reporting days, helped by strong financial results from the banking sector, easing crude oil prices and waning concerns on interest rates, but dipped on the last, March 20, when the latter returned. However, the Dow Jones still retained a week-on-week rise of 1.8%. Pharmaceutical and biotechnology stocks, too, were generally higher, with 27 of those tracked up and 16 falling.

Among the drug majors, Schering-Plough was the highlight, with a weekly gain of 4.7% after an upgrade from analysts at Goldman Sachs to in-line from underperform. Everyone was happy that Genentech, which increased 9.8% on the week, had raised its earnings per share growth guidance for 2006 from 35%-45% to 40%-50%. Ron Ellis of Prudential Financial kept his overweight rating on the stock, and both Piper Jaffray analysts and Jason Kantor of RBC Capital Markets kept their outperform view. Price targets were raised all around, even at Robert W Bair, which maintained its neutral stand. Analysts noted that Genentech's initial-stage pipeline is likely to lend support to the company's growth from 2012 onwards and that the new targets reflect the firm's ability to improve its earnings growth in the years ahead. John Sonnier of William Blair began coverage of Amylin, up 8.7%, with a market perform rating and company profile of "aggressive growth," estimating that the firm would generate revenue of $362.0 million this year, $625.0 million next and $866.0 million in 2008. He likes Byetta (exenatide) and Symlin (pramlintide), the company's strong management, significant pipeline growth potential, a strong balance sheet, and a partnership with Eli Lilly. Amylin is one of the highest-quality midcap biotechnology companies, he said. Marc Goodman of Morgan Stanley downgraded Cephalon shares, down 12.0%, to equal-weight from overweight ahead of an advisory panel meeting on Sparlon (modafinil), after comments that it could get a black box warning after documents indicated that the attention-deficit hyperactivity disorder drug could increase the risk of suicide in patients. That would lower its peak sales potential, he said, cutting the price target on the stock to $81 from $93.