Stock Commentary - New York week to Nov 13, 2006

NEW YORK: equities moved sharply lower after the Democratic wins in the mid-term US elections were confirmed, pulled down significantly by the pharmaceutical sector, but the Dow Jones still ended the reporting week to November 13 with a small, 0.2% gain. Of the drug and biotechnology stocks tracked, 28 fell and only 12 saw a rise. Drugmakers are now facing pricing pressure both domestically and abroad. The Democrats, who will be in the majority in both Houses of Congress from the start of next year, have indicated they will address the way current Medicare drug legislation prohibits the agency from negotiating prices and want increased oversight of the industry. And, outside the USA, drug companies continue to have pricing and reimbursement issues. Analysts also warned investors that though those firms working with stem cells may benefit in the long term, things may not happen quickly and, when they do, funding may go first to academic institutions.

Vertex stock continued to move up, rising 5.5% on the week, on speculation that its developmental hepatitis C drug, telaprevir, may be not only the most potent but also the first to the market, beating other products being developed by Roche, Novartis, Pfizer, Merck & Co and Schering-Plough. The company is expected to file for approval in 2008. The drug could have sales of $2.0 billion by 2011, according to analysts. ImClone stock moved up 5.4%, after a report that Erbitux (cetuximab) will become the market leader for squamous cell carcinoma of the head and neck by 2015, with sales of $250.0 million (see page 27). The drug, along with Taxotere (docetaxel), will help expand the SCCHN market, now worth about $50.0 million, to about $350.0 million by 2015. Interim results of an early-stage antitumor drug trial that showed positive results helped push ArQule stock up 18%. The drug, ARQ 197, inhibits the activity of c-Met, a key receptor tyrosine kinase involved in tumor growth and metastasis. Cytogen, down 11.9%, plans to raise $20.0 million through a private placement of warrants and common stock. The proceeds would be used to support the launch of Caphosol, advance its clinical development programs and pursue additional licensing opportunities.