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Executive Summary

The prospect of price competition in the CSF market helped stimulate a 3-1/2 point rebound in Immunex shares during November trading to 20-3/4. A 137-patient comparative trial of Immunex' granulocyte- macrophage colony stimulating factor Leukine and Amgen's granulocyte CSF Neupogen was scheduled to be presented the week of Dec. 6 to the American Society of Hematology meeting in St. Louis. An abstract of the trial concludes that both G-CSF and GM-CSF were well-tolerated "and have comparable toxicity profiles except for higher grade I fever with GM-CSF. However, this difference did not have an impact on clinical care." Among other Leukine trials set for presentation at ASH, a 118-patient placebo-controlled study of GM-CSF in acute myelogenous leukemia patients found a significant benefit for Leukine in neutrophil recovery and suggested a mortality benefit. Since its merger with Lederle Oncology was completed in June, Immunex has been out of favor on Wall Street. Optimism about Leukine, however, continues to be able to move the stock on the potential of a sales breakout to levels more consistent with Neupogen's. Some analysts turned bullish based on their impressions of the ASH data. Hambrecht & Quist's Wole Fayemi, for example, argued that the data "will shift the way physicians view these products." Reading the trials to show comparable safety and efficacy of the two CSF products, Fayemi argued that Leukine's lower price tag could translate into higher sales in a more price-conscious market. Immunex still has its bears. Several analysts have argued that Leukine's prospects for receiving approval for broader indications have dimmed in recent months, and the market has not yet shown evidence of price-sensitive shifting of Neupogen patients to off- label Leukine use. While investors by and large have not seen much value in the oncology franchise brought to Immunex in the merger with Lederle, the biotech firm's relationship with American Cyanamid does provide a stabilizing influence on the stock price. On Nov. 30, Immunex announced that Cyanamid had notified the company that it was considering increasing its 53.5% stake in Immunex pursuant to the merger agreement. Cyanamid is allowed to increase its stake to up to 70% of Immunex. A fledgling rally in the biotech sector stumbled in November, as the pharmaceutical component of the "F-D-C" index of 0-T-C traded issues dropped for the first time in four months. The formerly sizzling generic sector also cooled dramatically. The closing of Hoechst's tender offer for a controlling interest in Copley prompted an I I-point (22.9%) plunge in those shares. Copley's tumble, however, was dwarfed by Zenith's precipitous 23- point slide. After an extraordinary run-up from its 1993 opening of 19 to 80 by Oct. 31, the stock lost almost 30% of its value in November. The vulnerability of Zenith was highlighted in a Nov. 22 Barron's article that included the stock among a list of 19 companies ripe for an end-of-the-year correction.

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