Drug Stocks Follow Broader Market North

By Val Brickates Kennedy

Drug stocks followed the broader market north early Tuesday, pushed higher by news that troubled Citigroup Inc. (C) had turned a profit during the first two months of the year, beating expectations.

The Amex Pharmaceutical Index (DRG) climbed 1.5% to 221.83 and the Amex Biotechnology Index (BTK) advanced 2.3% to 554.55. The Dow Jones Industrial Average rose 3% to 6765.

Schering-Plough Corp. (SGP) and Merck & Co. (MRK) were early gainers, both up 4% at $20.84 and $21.80, respectively.

On Monday, the two U.S. drugmakers announced they plan to merge in a deal worth $41.1 billion.

Under the terms of the deal, Schering-Plough shareholders will receive $10.50 in cash and 0.57 in Merck stock for each share of Schering-Plough. Merck's total bid amounts to $23.61 a share. The combined company will be called Merck and headed by Merck Chairman and Chief Executive Richard Clark.

Shares of Genentech Inc. (DNA), meanwhile, moved about 1% lower to $92.13. Early Monday, Dow Jones Newswires reported comments made by Roche's chairman that Genentech's suggested bid price of $112 a share was not "realistic."

Roche, which holds a 56% stake in Genentech, has formally bid $93 a share for Genentech as part of a protracted battle to gain control of the biotech giant. The Wall Street Journal reported Monday that Roche (RHHBY) could raise its bid this week to $95 a share.

In early March, Genentech's board said they valued the company at around $112 a share.

Also losing ground were shares of stem cell researchers, which had rallied Monday on news President Barack Obama was lifting certain research funding restrictions that had been put into place by the Bush administration.

Shares of StemCells Inc. (STEM) tumbled 15% to $1.69, while Cytori Therapeutics (CYTX) shares sank almost 30% to $1.88. Tiny Advanced Cell Technology (ACTC) saw its shares skid 10% to 13 cents a share. Also falling almost 10% were shares of Geron Corp. (GERN) and Aastrom Biosciences (ASTM).

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