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Executive Summary

Biogen (up 9-3/8 to 32-1/8) and Immunex (up 7-1/8 to 44-7/8) broke from the biotech pack in September on the strength of solid cash positions, growing product revenues and upcoming presentations of clinical trial results for potentially significant products. The Biogen and Immunex gains reflect a conservative, selective return to the biotech sector by investors who are attracted by the two companies' relatively low-risk profiles. Overall, biotech stocks continue to show few indications of a recovery. The pharmaceutical component of the "F-D-C" Index of OTC stocks slipped 2% in September and, except for brief rallies in May and July, has fallen every month since January. A Sept. 9 announcement by Biogen fueled that stock's run up. Biogen said it expects higher than projected third quarter earnings based on royalties from "exceptionally strong" sales of Schering-Plough's Intron A (interferon alfa) and Merck and SmithKline Beecham's respective hepatitis B vaccines. In addition, investors are anticipating positive results from Biogen's Phase II hirulog trials, which will be presented at the American Heart Association meeting in New Orleans in November. Immunex has bounced back from a June close of 28-3/4 with consecutive gains in each of the past three months. The turn- around was triggered by the resolution of Immunex' breach-of- contract lawsuit with marketing partner Hoechst-Roussel on July 23 that will result in Immunex' Leukine being the sole GM-CSF product on the U.S. market. The stock has also benefited from investor enthusiasm about the company's pipeline. At an investor conference in Seattle in early September, Immunex Exec VP Steven Gillis, PhD, reported the results of a Phase I/II trial of the firm's soluble IL-1 receptor based on an allergen scratch test. The study found that the compound has a long half-life in the blood stream, eliminates allergic response at very low doses, showed no toxicity or side effects and did not induce an antibody response. The company plans to initiate a trial in asthma patients by the end of 1992 and two trials are underway in arthritis. The Immunex pipeline project that has attracted the most investor attention is PIXY 321, a GM-CSF/IL-3 hybrid molecule, currently in Phase II. Trial results from the PIXY 321 Phase I/II studies will be presented at the American Society of Hematology meeting in Anaheim in early December. In addition, Gillis said Immunex still hopes to file for an expanded Leukine label by the end of this year. One sign that the biotech sector may have bottomed out is the rebound of several recently public R&D boutiques. Amylin (up 3-3/4 to 10) is a case in point. The diabetes R&D firm went public Jan. 17 at 14 and quickly shot up to 20, where it began a steady decline to 6-1/4 at the end of August. The stock's resurgence began with Morgan Stanley analyst Duncan Moore's Aug. 28 "buy" recommendation. As investors warily return to biotech, Amylin stands out because of its discount price relative to the IPO and because its first drug, Normylin, has entered Phase I trials in the U.K.

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