Drug Stocks, Broader Market Slide Due To Economic Fears

By Val Brickates Kennedy

Drug stocks fell in early action Monday as the broader market reacted negatively to a warning issued by Bank of America (BAC) that credit markets were continuing to deteriorate.

The Amex Pharmaceutical Index and the Amex Biotechnology Index were both off by about 1% at 239.43 and 632.90, respectively.

The Dow Jones Industrial Average lost about 160 points, or almost 2%, to rest at 7,974.

One bright spot was Amylin Pharmaceuticals (AMLN), up 3% at $10.43.

Early Monday, an Amylin director, James Wilson, accused Amylin activist investor Carl Icahn of pushing for a sale of the company to Eli Lilly & Co. (LLY), which co-markets Amylin's top-selling product Byetta.

Last year, Icahn was able to navigate a takeover deal between another investment, ImClone Systems, and Lilly for $6.5 billion. Icahn is currently engaged in a proxy battle with Amylin's board. Wilson, who serves as Amylin's lead independent director, says a deal with Lilly at this time would seriously undermine Amylin's value.

Wilson made his comments in a proxy addendum filed Monday.

Meanwhile, Lilly shares were up 1% at $33.93, after the drugmaker unveiled a better-than-expected first-quarter earnings report.

Despite the solid performance, Lilly affirmed its 2009 financial forecast.

Lilly reported first-quarter net income rose 23% on 5% higher revenue, due largely to strong U.S. sales and improved gross margins.

Lilly added that the change in foreign-exchange rates boosted gross margins by almost 7 points to about 84%. U.S. revenue jumped 13% to $2.87 billion, while foreign revenue slid 4% to $2.18 billion due to a higher U.S. dollar.

Dendreon Corp. (DNDN) was the standout on the biotech side. Shares of the cancer-vaccine developer shot up 11% to $19.95 after the stock was upgraded to buy from hold by Lazard Capital.

On Sunday, Dendreon released additional positive data for its prostate-cancer therapy Provenge, which has had difficulty winning U.S. regulatory clearance. Dendreon presented the data at the annual meeting of the American Association for Cancer Research.

-Val Brickates Kennedy; 415-439-6400; [e-mail]