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Business

July 17, 2006
Volume 84, Number 29
pp. 28-29

Stock Indexes Fall In Second Quarter

Shares of most chemical and pharmaceutical companies drop; shares of biotech firms plunge

William J. Storck

Stock indexes for chemical, pharmaceutical, and biopharmaceutical companies all declined in the second quarter from the end of the first quarter. Major indexes such as the Dow Jones industrial average and the NASDAQ also turned in lackluster performances as investors continued to worry about higher interest rates and energy costs.

If there is one word to describe stock market performance during the quarter, it is volatile. All of the indexes experienced large swings. Typical was the Dow Jones industrial average, which changed by 100 points or more during some trading days.

To a large extent, the percentage changes in the highs and lows showed the volatility during the second quarter. The high for the Dow Jones was 11642.6, up 4.8% from its March 31 close. Its low of 10706.1 was down 3.6% from the end of the first quarter. The Dow Jones also experienced large daily changes: It recorded four days of greater-than-100-point increases, ranging from 104.6 to 196.0 points, and five days in which it fell between 119.7 and 199.2 points.

The NASDAQ, which is made up largely of smaller capitalization firms and includes many biotech companies, saw a high of 2370.9, up just 1.3% from the first-quarter close, and a low of 2072.5, down 11.4%.

The same pattern largely holds for the C&EN chemical, drug, and biotech indexes. The 25-chemical-company index (for all C&EN indexes, 1992 = 100) posted a high of 224.1, up 6.3%, and a low of 199.1, down 5.6%. The pharmaceutical index of nine major drug companies posted a high of 357.8, up just 0.2% from March 31, but its 343.1 low was down 4.1%. For 14 biotech firms, the high of 566.5 was up only 0.1% from the end of the first quarter, and the low was down 13.0% to 492.3.

At the end of the second quarter, the three C&EN indexes were all down from where they had been at the end of March. The chemical company index was off a slight 0.5% to 209.8, and the pharmaceutical index fell 1.0% to 353.6. The biotech index, however, dropped 8.1% to 522.4. Meanwhile, the Dow Jones closed at 11150.2, up just 0.4% from the end of the first quarter, and the NASDAQ plunged 7.1% to 2172.1.

Chemicals were still up from the end of 2005, rising 7.0%, while pharmaceuticals eked out a 1.8% gain. The biotech index was down 7.9%. The Dow Jones was up 4.0%, but the NASDAQ was off 1.5%.

Of the 25 companies that make up the chemical index, 14 ended the quarter with lower stock prices than they had on March 31. The largest percentage drop was at Chemtura, where the stock price closed at $9.34 per share, 20.7% below its March 31 price. Close behind was Ferro, which suffered a 20.2% fall to $15.96 per share. Since the Cleveland-based company has yet to file its audited 2005 results, traders have little to go on when evaluating the company.

Other double-digit declines were sustained by H.B. Fuller, down 15.1% to $43.57 per share; Cytec Industries, off 10.6% to $53.66 per share; and Huntsman Corp., down 10.3% to $17.32 per share.

Industry leader Dow Chemical saw its stock decline 3.9% to $39.03 per share, bringing its year-to-date fall to 10.9%. DuPont, the number two chemical company, posted a 1.4% decline for the quarter to $41.60 per share. For the first six months, it is down 2.1%.

There were three good gainers among the chemical companies, however. Arch Chemicals' stock price rose 18.6% during the quarter to $36.05 per share, Hercules saw its stock price rise 10.6% to $15.26 per share, and Sigma-Aldrich gained 10.4% to $72.64 per share.

Drug companies showed little change for the quarter, compared with chemical or biotech firms; gains and losses all clustered in the single-digit range. The best performance was at Bristol-Myers Squibb, where the stock price increased by 5.1% to $25.86 per share. Bristol-Myers Squibb was followed by Merck, with a 3.4% increase to $36.43 per share; Abbott Laboratories, up 2.7% to $43.61 per share; Johnson & Johnson, up 1.2% to $59.92 per share; and Schering-Plough, which eked out an increase of 0.2% to $19.03 per share.

On the down side, four companies posted declines for the quarter: Wyeth was off 8.5% to $44.41 per share; Pfizer fell 5.8% to $23.47 per share; Baxter was down 5.3% to $36.76 per share; and Eli Lilly & Co. almost broke even, declining a scant 0.1% to $55.27 per share.

It was the biotech companies that really suffered. Only two companies, Celera Genomics and Vertex Pharmaceuticals, saw increases for the quarter. Celera's stock price rose 10.8% to $12.95 per share. The rise came after Celera announced a collaboration with Medarex to develop therapeutic antibodies and a collaboration with Specialty Laboratories to commercialize cirrhosis testing. Vertex Pharmaceuticals showed a negligible increase of 0.3% to $36.71 per share.

Of the companies showing declines, PDL BioPharma, formerly Protein Design Laboratories, saw its stock plunge 43.9% to $18.41 per share. Much of the drop came after the company reported earnings, excluding unusual items, of just 2 cents per share, well below the 14 cents per share expected by analysts.

PDL was followed by Cytogen, where the stock dropped 30.9% to $2.50 per share. Large percentage swings in this company's stock are common because its stock price is so low.

Amgen, the biotech industry leader, suffered a 9.3% decline to $65.23 per share, while at Genentech, the number two company, the stock fell 3.2% to $81.80 per share.

Going into the third quarter, the stock market continues to fumble. Largely as a result of the North Korean missile tests and continued worries over inflation and interest rates, the Dow Jones industrial average fell 0.5% in the first week of the third quarter while the NASDAQ dropped 1.7%.

Among the C&EN indexes, only the chemical index declined, dropping 1.4%. The pharmaceutical index was up 0.7%, and the biotech index edged up 0.2%.

MORE ON THIS STORY

TABLE 1 - CHEMICAL STOCKS

Most chemical companies saw lackluster stock price performance

TABLE 2 - DRUG AND BIOTECH STOCKS

Indexes fell for both drug and biotech companies

Chemical & Engineering News
ISSN 0009-2347
Copyright © 2010 American Chemical Society

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