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Executive Summary

Viratek gained a net 19-3/4 points to close August at 67 after a roller-coaster ride to near 100 after splitting. The issue was the biggest gainer on the "F-D-C" Monthly Index of OTC stocks during August. Analyst reports on ribavirin's potential effectiveness against AIDS, based on very early study results, fueled an impressive price run-up by Viratek. From a price of 67 after a two-for-one split on Aug. 19, Viratek jumped to a high of 98-1/2 on Aug. 21. While the stock slid back over 30 points to 67 at the end of the month, the value of Viratek stock has increased by more than six-fold since the beginning of the year. Newport Pharmaceutical (up 1-1/8 to 6-3/4), another developer of an antiviral agent with potential against AIDS, is showing evidence of a stock turnaround. In August, the company announced that it had hired a new president, J. Roberts Fosberg, to replace Harold Glaskey who was ousted last March after Newport's NDA for isoprinosine in AIDS was rejected by FDA. Newport also reported that it has initiated a multi-center isoprinosine clinical study in AIDS that will involve upwards of 2,000 patients. Viratek and Newport were among several R&D firms in the F-D-C Pharmaceutical Component to make major gains in August. Elan (up 3-7/8 to 17-1/2), EnzoBiochem (up 2-1/2 to 12-7/8), LyphoMed (up 2-7/8 to 22-7/8), and R. P. Scherer (up 2-1/8 to 20) all appreciated by more than 10% during the month. Another dynamic performer on the "F-D-C" OTC index during 1986, Genentech (up 9-1/4 to 89-1/4) rebounded in August after plummeting 10 points in July. Analyst expectations that Genentech's recombinant tissue plasminogen activator (TPA) Activase could be approved as early as 1987 and generate significant product sales soon after have acted to buoy the stock despite vagaries in the market. Genentech filed an NDA for an I.V. form of Activase in April. Overall, gainers outnumbered declining stocks on the 46-issue OTC Monthly Index by more than two-to-one in August as 29 stocks advanced, 13 retreated, and four remained unchanged. The index Composite moved up 4.1% and all but the Chain Component rebounded strongly after the July slump. The Dow and the S&P 400, by comparison, increased 6.9% to 1898.34 and 6.7% to 278.14, respectively. Despite the general market advance, several biotech stocks headed south, including: Damon Biotech (off 1-1/2 to 5), Integrated Genetics (down 1-1/4 to 10-1/8), Amgen (down 5/8 to 21-3/4), Cetus (down 5/8 to 28) and Centocor (down 1/2 to 35). During the month, Cetus predicted a first half FY 1987 loss due to the planned costs of building a European subsidiary, EuroCetus. In addition, Cetus is also facing a patent challenge for three of its interleukin-2 patents from Amgen. Led by Moore Medical (up 3 to 26-1/2), all five drug wholesalers listed on the index posted gains in August. Alco Health Services (up 1-1/8 to 22-3/8) is looking to raise $100 mil. via a debt offering in order to continue the company's acquisition momentum. Since its initial public offering last summer, Alco has acquired four regional wholesalers. Also advancing were Owens Minor (up 1 to 15-3/4), Bindley Western (up 5/8 to 11-5/8), and Durr Fillauer (up 1/2 to 13). Chart omitted.

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