Stock Commentary - New York week to Oct 23, 2006

NEW YORK: after a poor start, equities gained pace during the reporting week to October 23, not only breaking through - but retaining - the magic 12,000 level, with the Dow Jones up an overall 1.1%, as investors reacted positively to a strong set of third-quarter earnings reports. The positive sentiment spilled into the pharmaceutical and biotechnology sectors, where the financial reporting season is now in full swing, with 25 of the stocks tracked rising and 16 falling.

The non-approvable letter from the Food and Drug Administration for faropenem medoxomil is seen as a major setback for Forest Laboratories, down 8.7% on the week, and its partner Replidyne, which have said they would need at least two years for more clinical studies. The drug, which analysts expect will continue to be developed and could still make more than $200.0 million annually, was Forest's only near-term pipeline product. The firm has had a good run since a key patent was upheld on Lexapro (escitalopram oxalate) this summer. This runs out in 2012 and that for Namenda (memantine HCl) in 2010; the new drug would not be on the market before 2009. Medarex and partner PharmAthene have released positive results of a Phase I trial for Valortim (MDX-1303). The two companies have received a $1.0 million grant from the US Department of Defense for continued development of the anthrax drug. Medarex stock was up 6.8%. ICOS stock rose 16.6% ahead of a November 2 earnings report that was expected to show much improved profit, with analysts forecasting earnings of $0.04 a share, up from a loss of $0.18 in the same quarter last year. This positive note adds to the recent news that Eli Lilly, which rose just 0.4%, is to acquire the firm in a cash transaction (Marketletter October 23). Wall Street eyes were focused on Jeffrey Kindler, as Pfizer's new chief executive stepped up to unveil its quarterly profits (see page 3). But Pfizer, which gained just 0.3% on the week, now says it will have to go beyond a $4.0 billion cost-cutting program in a hunt for greater efficiency. Mr Kindler's forecast of flat growth in the years ahead was a discouragement to analysts, who had been hoping for something more aggressive on the spending reduction side.