Chemical Stocks Fall in Quarter

Chemical stock prices generally fell in the second quarter from the end of March, while pharmaceuticals and biotech share prices mostly rose, according to C&EN's quarterly survey of stock prices. This pattern was the opposite of the first quarter, when the chemical stock index outperformed the indexes for pharmaceuticals and biopharmaceuticals.

C&EN's index of 25 chemical stocks fell 6.7% in the quarter to 192.9 (all indexes are 1992 = 100), wiping out the 2.1% gain seen in the first quarter of this year as investors worried about the effect of high oil prices on corporate earnings.

Meanwhile, the increases in the pharmaceutical and biotech indexes largely offset the declines they had registered in the first quarter. The index for nine major drug companies rose 3.7% to 362.8, offsetting the 1.5% decline in the January through March period. The biotech index of 15 firms jumped 12.0% to 446.0, not quite canceling the 13.9% decline of the first quarter.

For the first six months of the year, the chemical index was off 5.2% from Dec. 31, 2004, whereas the index for the drug stocks was up 1.2%. Biopharmaceuticals still lagged behind the end of last year by 4.7%.

By comparison, the Dow Jones industrial average was down 1.2% for the second quarter, while the Standard & Poor's 500 was up 0.9% and the NASDAQ, where most of the biotech stocks are lodged, rose 3.6%.

For the companies that make up the chemical index, the number of declines swamped the number of gains, with 20 firms showing lower stock prices at the end of the quarter, while just five had any improvement. The declines ranged from a 0.3% slip at Cabot Corp. to $33.00 per share to a 33.3% fall at Georgia Gulf to $31.05. Seven of the companies showed drops of 10% or greater.

Even Great Lakes Chemical, with its stock price bolstered by anticipation of its July 1 merger into Crompton to form Chemtura, had a 2.3% decrease in its share value to $31.47.

The increases among the five companies were led by H.B. Fuller with an 18.9% jump to $34.06 per share. But the improvements at the other four firms were much more modest: 7.5% at Ferro to $19.86 per share, 5.7% at FMC Corp. to $56.14, 1.9% at Lubrizol to $42.01, and 1.4% at Albemarle to $36.47.

The two largest companies on the list--Dow Chemical and DuPont--showed significant declines. Dow was off 9.4% to $44.53 per share, and DuPont's stock price dropped 15.4% to $43.01 per share.

While 80% of the chemical stocks in the index were heading downhill in the second quarter, all but two of the pharmaceutical companies showed improvement. Merck's stock price fell 4.7% to $30.80 per share; Johnson & Johnson's share price declined 2.8% to $65.00.

Pfizer, which had seen its share price suffer in the first quarter because of investor concerns over its COX-2 inhibitors, one of which it withdrew from the market during that period, rallied somewhat in the second quarter despite adverse reports about its erectile dysfunction drug, Viagra. Pfizer's stock price in the second quarter rose 5.5% to close the period at $27.58 per share.

Another company that has seen a lot of bad news but showed a significant increase was Schering-Plough, where the stock price rose a very respectable 6.5% to $19.06 per share. The company's share price, though, was still down 8.7% from its close at the end of 2004.

Other companies showing good stock growth in the quarter include Baxter, up 9.9% to $37.10 per share; Eli Lilly & Co., up 8.8% to $55.71; Wyeth, up 6.7% to $44.50; and Abbott, up 6.1% to $49.01.

CHEMICAL STOCKS
Twenty out of 25 firms saw stock prices drop in the second quarter

AMONG THE 15 biopharmaceutical companies, only five firms saw their stock prices decline in the quarter. The largest percentage decline was at Cephalon, where its share price fell 13.5% to $39.80. This came after at least one analyst lowered earnings estimates for the company.

Cytogen's decline was about half that of Cephalon's, falling 6.3% to $5.23 per share. This decline follows a 49.7% drop in Cytogen's stock price in the first quarter after a Food & Drug Administration panel would not recommend approval for an investigational functional molecular imaging agent. Declines at the other three companies were rather modest. Shares at Icos fell 3.8% to $21.17, the stock price at Biogen Idec was down 0.8% to $34.45 per share, and Chiron was down 0.5% to $34.89 per share.

Two companies with ties to Merck showed the largest percentage growth for the quarter. The stock price at Vertex Pharmaceuticals, which initiated a third clinical trial of a small-molecule inhibitor of Aurora kinases with the larger drug company, saw its stock move up 85.2% in the quarter to $16.85 per share.

And Xoma, whose stock price got down to 99 cents per share during the quarter, rebounded to close at $1.68 per share, 69.7% above where it was at the end of the first quarter. During the quarter, Xoma said it has granted Merck a license to use Xoma's bacterial cell expression intellectual property for phage display, which has potential use in the discovery of antibody products.

Genentech scored a 42.6% increase in its stock price to close the quarter at $80.28 per share after it reported a 50.0% increase in both revenues and earnings in the quarter, which the company said were fueled by four new products.

The stock price at industry leader Amgen climbed 5.4% to $60.46.

The third quarter seems to be starting off well, at least for chemical and biotech stocks. In the first five trading days of the quarter, C&EN's chemical index rose 1.8% to 196.3, and the biopharmaceutical index increased 5.0% to 468.4. The pharmaceutical index was up just 0.2% to 363.5. Meanwhile, the Dow Jones industrial average rose 1.7% and the NASDAQ increased 2.7%.

DRUG AND BIOTECH STOCKS
Biotech stocks outperformed pharmaceuticals and major indexes