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Executive Summary

Centocor (up 10-1/2 to 43-1/4) and Xoma (up 5-1/4 to 24-1/8) continue to benefit from the "Street's" close attention to the looming competition between Centoxin and Xomen-E5. The race to approval for Centocor's and Xoma's competing monoclonal antibody-based antisepsis products erupted during May in scientific conferences and the financial and general media. Following publication in an April scientific journal, Centoxin study results were reported May 5 at the American Federation of Clinical Research. The study showed a 51% reduction in mortality in patients with septic shock, which, on the surface, seems to indicate a better outcome in shock patients than Xomen-E5. Xomen-E5 study results were presented last year. Xoma is also about six months ahead of Centocor with its PLA filing and was issued a broad patent in April. In fact, Xoma filed suit against Centocor following issuance of the patent, charging infringement. Because of Centocor's recent stock price run-up resulting from the growing press attention to Centoxin, Shearson Lehman analysts Teena Lerner and Mary Ellen McCarthy are telling clients that Centocor is "getting ahead of itself." The stock has increased in value by 73% since the beginning of the year, when it was trading in the mid-20s range. By contrast, Lerner and McCarthy say that Xoma is still the "best and cheapest way to invest in anti-sepsis therapy" -- a market they forsee at $500-$700 mil. worldwide by 1994-95 based on a 1991 approval forecast. Even without a boost from Xomen-E5, the analysts are predicting that Xoma will break into profitability by the end of the year. * The "F-D-C" OTC Index in May posted its biggest monthly advance of 1990, gaining 9.6%. The Index increase was backed by solid gains in the pharmaceutical (up 10.7%) and diversified (up 9.7%) components and closely tracked broader May market indicators: the S&P 400 rose 9.5% and the DJIA climbed 8.3%. Among the contributors, Amgen's market performance (up 6-1/8 to 70-1/8) in May continues to reflect inroads made by Epogen into the dialysis market. Amgen's EPO sales in the last 10 months of fiscal 1990 approached $150 mil. The biotech stock may also have been affected by anticipation of a final showdown for EPO's orphan status, with word coming late in May that FDA's Blood Products Advisory committee will look at whether the agency can differentiate, for orphan exclusivity purposes, Chugai-Upjohn's Marogen from Amgen's Epogen. However, FDA now appears to be having second thoughts about holding the advisory committee meeting, which had been scheduled for June 29. Genetics Institute, which had a bad news/good news month, rebounded from an April 6.5% drop with a 5.5% gain (up 2 to 38-1/4). The company responded to Wellcome's dropping of a TPA licensing agreement with the filing of a PLA for recombinant Factor VIII, a major deal with Fujisawa for funding and bone morphogenetic growth factor and an M-CSF royalty-free cross-licensing arrangement with Cetus. Cetus climbed 14.8% to 16-1/2. As expected, it won an ITC doxorubicin case against Erbamont and expanded hypertension trials of IL-2. Immunex, May's top gainer, zoomed 53.1% to 24-1/2. The biotech firm has cloned the gene encoding a receptor for human tumor necrosis factor and has developed a soluble form of the receptor.

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