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Executive Summary

Anergen (up 1-1/4 to 11-1/2 in February) is bucking the loss of energy and enthusiasm for the biotech companies in the stock market. Against a strong ebb tide in the biotech sector, Anergen was active with a strong gain on Feb. 27, finishing the next day up over 12% for the month. Anergen is a four-year-old company working on combinations of epitopes and major histocompatibility complex to turn off autoimmune reactions. Anergen reports having one of its AnergiX compounds for multiple sclerosis in early stage human testing. While Anergen stock showed a quiet strength during the recent downturn, the company's overall experience since going public in September of last year has been anything but quiet. Anergen shares went on a wild market ride in October, when the epitope approach to the immune system got wide play in the lay press. The stock vaulted ahead to 31-1/2 in late-October during the height of the general interest in start-up medical companies. At one point during the heated trading, more shares changed hands in one day than the company had outstanding. By the end of October, the stock had fallen back to 16-1/2. By the end of the year, it closed at 10-5/8. Anergen was one of only 10 issues gaining in February among the 64-issue pharmaceutical component of the "F-D-C" index of NASDAQ-traded companies. The extent of the run from biotech companies was indicated by the breadth and size of declines: 12 companies dropped more than 20% during the month. Some of the February losers moved down despite good news. Cytogen, for example, with two products (Myoscint and Oncoscint) recently recommended for approval by FDA advisory committees, quickly lost appeal to the market. The company slipped four points (almost 17%) in trading during the month. Similarly, gene therapy got a strong boost of publicity from a full-agenda of protocol reviews by the NIH's Recombinant DNA Advisory Committee (RAC) on Feb. 10-11, but the market edged the companies involved in that field down. The approved protocols included a number of research projects using vectors from Genetic Therapy (off 3-1/4 points or almost 22%). Immunex, which took advantage of a favorable review for its first gene therapy protocol to announce a spinoff in that field (Targeted Genetics), also was on the down side for the month. The issue dropped 8-3/4 points (14%). In addition to staking out a position in genetic therapy, Immunex also reported Prokine sales of $29 mil. in 1991. While gene therapy stocks weren't hot in February, private placements were. Cambridge, Mass.-based Transkaryotic Therapies completed a $15.5 mil. private placement of Feb. 27. The firm said it will use the funds in part to scale up for clinical trials it expects to conduct in 1993 Three of the largest percentage gains for the month among the pharmaceutical stocks were turned in by generic companies. Taro Vit, an Israeli firm with a number of generic dermatologicals on the market through a U.S. subsidiary, climbed 27.5% to close at 11. On Feb. 20, the company sold 700,000 of its shares to the venture capital firm, Galen Associates (at $5.90 per share). On March 4, the company reported submitting to FDA eight ANDAs for dermatological products in the last three months. The company claims to have 18 ANDAs pending at the agency. Four OTC dermatologic creams have recently been introduced by Taro Vit: Miconazole nitrate 2%; tolnaftate 1%; hydrocortisone cream 1/2% and 1%. The firm says two additional OTC ointments (hydrocortisone 1% and 1/2%) are "expected to be introduced in the near future." On a reversal of fortunes in the cefadroxil patent wars, Zenith won a court clearance on Feb. 21 for an overseas supply of the product ("The Pink Sheet," March 2, T&G-2). Zenith now has to try to convince a Spanish subsidiary of Sandoz to make the product again. Zenith also is trying to wrap up a dispute with FDA over the status of its Northvale, N.J. manufacturing facilities. An investment group, including an arm of Fidelity Management & Research of Boston, increased its stake in Zenith at the beginning of February to just short of 10%, according to a filing with SEC. Zenith was up 3 for the month to 23. Teva, another Israeli company involved in the U.S. generic business, through its Lemmon subsidiary, was also up for February. Lemmon received its first two ANDA approvals in over four years: clemastine fumarate (Tavist, Sandoz) and fluocinonide ointment (Lidex, Syntex). For the first two months of 1991, Teva is up almost 30%; Taro Vit is up at the faster rate of 87% for the same period. In fact, despite the gloomy February performance, the biotech/pharmaceutical field still looks okay when observed from a two-month perspective. Over a third of the pharmaceutical component companies are showing net gains from their 1991 closings during that period. One of the start-ups, Aphton, is up over 135% (from 7-3/4 to 18-1/4) for the two-month period.

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