Elonva is the first in a class of sustained follicle stimulants (SFS). It scores better than the current available treatment option − a single subcutaneous injection of Elonva is likely to replace the first seven injections of any daily recombinant follicle stimulating hormone (rFSH) preparation in a COS treatment cycle.

The positive opinion of the committee is based on data from Elonva’s phase III development program, the Engage trial, which is the largest double-blind fertility agent trial ever performed. The data was quite encouraging for Elonva. The primary endpoint of the trial, the ongoing pregnancy rate (assessed at ten weeks or more after embryo transfer), for Elonva treatment arm was similar to the patients receiving a daily dose of rFSH for seven days (38.9% vs 38.1% per started cycle respectively).

The fertility industry is worth an estimated £500 million (approximately $820 million) a year in the UK. We believe a positive opinion from the committee has increased the probability of final approval. Viewing the potential of the market, we expect Elonva to add value to Merck’s current product portfolio. We have a Neutral recommendation on Merck.

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Chicago, IL – November 13, 2009 – Zacks.com announces the latest Industry Outlook. Today, Zacks Equity Research discusses the Steel Industry, including ArcelorMittal (MT), Steel Dynamics Inc. (STLD), AK Steel Holding Corporation (AKS), United States Steel Corporation (X) and Nucor Corporation (NUE).

ArcelorMittal (MT) is the world’s largest steel company with steel production of 103.3 million tons in 2008. Other major players in the industry are Steel Dynamics Inc. (STLD), AK Steel Holding Corporation (AKS), United States Steel Corporation (X) and Nucor Corporation (NUE).

The Asia-Pacific region, especially China and India, is witnessing higher production and consumption of steel. This is due to the per capita consumption reaching up to U.S./European levels, which could, theoretically at least, double steel demand in the longer-term. China has set up the largest steel industries in the world, driven by increasing demand for rapid urbanization and large infrastructure projects. The country accounted for nearly 50% of monthly total world production in August 2009.

China’s share is larger than the combined production of the U.S., the European Union (EU), Russia and Japan, which have historically been the largest producers of steel. In 2001, China's annual share of world production stood at 17%, while the EU accounted for the largest share at 18%. In eight years, China's share of world production has almost tripled, while other producers have seen their shares decrease. Ranked behind China are Japan and the U.S.

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Chicago, IL – October 12, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Ford (F), Honda (HMC), Caterpillar (CAT), Boeing (BA) and Chevron Corp. (CVX).

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Here are highlights from Friday’s Analyst Blog:

Trade Deficit Improves

While the year-over-year improvement in the trade deficit is very good news, the reason for it is not so good. It was a reflection of the overall collapse in world trade, something that makes everyone poorer. As far as the GDP calculations are concerned, it does not make any difference -- a decline in the trade deficit is a decline in the trade deficit -- and it is something that feeds directly into the calculations.

However, it is not like there has been a big surge in people buying domestically produced Fords (F) rather than foreign produced Hondas (HMC). Rather, the fall in imports has been simply fewer people buying cars, period. Currently, for every dollar of goods and services we export, we import $1.24 -- down from $1.38 a year ago, but still way out of whack.

It was not until the price of oil crashed last fall that we started to see real improvement in the overall deficit. Now that benefit is largely gone. While the price of imported oil has a bit of a lag with the prices in the pits, there is clearly a relationship. The price of imported oil bottomed in February at $39.22 and was $64.75 in August. It will most likely go up again in September.

It is somewhat ironic that the most dramatic part of the improvement in the trade deficit came as the dollar dramatically strengthened a year ago in the flight-to-safety trade. The path of the trade deficit has not yet been greatly affected by the path of the dollar, for two major reasons.

First, a very large part (over half) of our trade deficit is due to oil imports, and when the dollar is weak, the price of oil tends to go up to compensate. Second, our biggest single deficit is with China, which has effectively pegged the Yuan to the dollar. In August, the China deficit fell to $20.2 billion from $20.4 billion, but still represented 65.1% of the total deficit. Put another way: in August, our deficit with China was more than our deficits with OPEC, The European Union, Japan and Mexico...combined!

The flight-to-safety dollar trade is now unwinding, and the greenback is almost back to the levels it was at before the fall of the House of Lehman. Over time, this should lead to further improvements in our non-oil trade deficit -- if not with China, then with the rest of the world. It might even indirectly help with the Chinese deficit even though the value of the Yuan is effectively fixed to the price of the dollar.

This would happen at the expense of the Japanese or the Europeans, as the Chinese decide to buy their heavy earth-moving equipment from Caterpillar (CAT) rather than from Komatsu, or airplanes from Boeing (BA) rather than Airbus.

Chevron’s Positive Upstream Update

Chevron Corp. (CVX) released its third-quarter interim update, covering the first two months of the quarter. On the whole, the update is positive, with earnings expected to be higher than in the previous quarter.

The company expects the upstream segment to benefit from an increase in crude oil prices as well as from gains of about $400 million associated with asset sales and tax items. Downstream results are likely to be relatively flat, as it continues to be hurt by weak refining margins. Chevron further said that unfavorable foreign currency movements will affect the segment profitability.

The best part of the update pertained to upstream volumes, highlighting Chevron’s attractive growth profile among the super-majors. The company reported that oil and natural gas production average 2.687 million oil-equivalent barrels per day – better than estimates and nearly 10% above the third-quarter 2008 level. Compared to the second quarter of 2009, production would be up by about a percentage.

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Chicago, IL – October 7, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bristol-Myers Squibb Co. (BMY), AstraZeneca Plc (AZN), Merck & Co (MRK), GlaxoSmithKline (GSK) and Eli Lilly (LLY).

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Here are highlights from Tuesday’s Analyst Blog:

European Nod for Bristol Drug

Yesterday, Bristol-Myers Squibb Co. (BMY) and AstraZeneca Plc (AZN) announced that their diabetes drug Onglyza (saxagliptin) received the green light from the European Commission to be marketed in the 27 countries of the European Union (EU). Onglyza once daily was co-developed by Bristol-Myers and AstraZeneca.

Onglyza can be used in combination with commonly prescribed oral anti-diabetic medications － metformin, sulfonylureas or thiazolidinediones for improving blood sugar levels in adults when those drugs alone fail to adequately control glycemic levels. The European approval is based on data from late-stage registrational trials which assessed the safety and efficacy of the drug and involved 4,148 type-II diabetes patients, including 3,021 patients treated with Onglyza.

Onglyza is expected to be launched in Europe in the fourth quarter of this year. It will be the first diabetes drug to be launched in Europe under this partnership.

As a reminder, the U.S. Food and Drug Administration (FDA) approved Onglyza for type-II diabetes in July 2009.

Onglyza, a dipeptidyl peptidase 4 (DPP4) inhibitor, will compete directly with Merck & Co’s (MRK) Januvia, which also belongs to the same class of diabetes medicines. Januvia and a related drug called Janumet, which includes metformin, constitute Merck's fastest-growing product line, with sales coming in at $1.75 billion in 2008. Drugs belonging to this class increase insulin production and lower the production of glucose.

We believe that the drug has blockbuster potential since the number of people suffering from diabetes is on the rise. The U.S. market for diabetes medicines exceeds $5 billion annually. Furthermore, the market has high potential with a huge unmet need. An estimated 246 million people across the globe suffer from diabetes which is a chronic disease in which the body fails to produce or properly utilize insulin. Most of them have type II diabetes which is linked to poor diet and lack of exercise.

Onglyza will compete with players such as Merck, GlaxoSmithKline (GSK) and Eli Lilly (LLY), among others. In addition to competition from existing products, competition is likely to increase with several companies seeking approval for their diabetes candidates.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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We believe the approval is quite significant as Diovan, one of Novartis’ top-selling drugs with global sales of $5.7 billion in 2008 is losing patent protection in most European Union countries in 2011 and in the U.S. in 2012. Competition is likely to intensify shortly as Merck’s (MRK) Cozaar (2008 sales of $3.5 billion) will lose exclusivity in the U.S. in 2010, bringing in low-priced generics.

The approval was based on a randomized, double-blind, placebo-controlled clinical trial on 1800 patients. The trial studied the impact of valsartan (160 mg and 320 mg) and aliskiren (150 mg and 300 mg) independently as well as in a combination therapy. It was found that blood pressure reductions with the Valturna combination were significantly greater than with the individual drugs or placebo at the 8-week primary endpoint.

Valturna will become an important alternative treatment option where blood pressure is not adequately controlled by aliskiren or angiotensin receptor blocker monotherapy. Research suggests that up to 85% of patients with high blood pressure may need multiple medications to keep their blood pressure in check, which further emphasizes the need for a combination treatment. The drug can be used for initial therapy as well for the patients who need multiple drugs.

Globally, more than a billion people are affected by high blood pressure, which is the prime cause of death worldwide. If left untreated, patients with high blood pressure are at risk of cardiovascular malfunctioning such as stroke, heart attack and heart failure, and of organ damage including kidney failure and vision problems. We believe Valturna should further strengthen the cardiovascular portfolio of Novartis, which recorded sales of $6.7 billion in 2008.

Chicago, IL – September 18, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Merck (MRK), Bristol-Myers Squibb (BMY), Gilead Sciences (GILD), GlaxoSmithKline (GSK) and Abbott Labs (ABT).

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Here are highlights from Thursday’s Analyst Blog:

Approval for Merck's Isentress

The European Union (EU) recently expanded the approval of Merck’s (MRK) Isentress (raltegravir) for the first line treatment of HIV patients. Earlier, it was approved for patients who had not responded to other treatment options. In the US, following a recent Food and Drug Administration (FDA) approval, Isentress can be used in combination therapy for previously untreated patients as well.

Isentress recorded worldwide sales of $172 million for the second quarter of 2009, an increase of 123% compared with the year-ago period. We believe the recent FDA and EU approval (for previously untreated patients) could increase the number of targeted patients considerably, leading to a significant rise in sales. We expect the drug to record more than $1 billion in revenues by 2011.

Recently, at the 49th Interscience Conference on Antimicrobial Agents and Chemotherapy (ICAAC) held at San Francisco, Merck presented data from a study comparing Isentress with Bristol-Myers Squibb’s (BMY) Sustiva (efavirenz) for 96 weeks in 563 previously untreated HIV patients. Patients who entered the study were required to have HIV viral loads greater than 5000 copies/mL.

The study found that treatment with Isentress resulted in similar virologic control as witnessed with patients treated with an efavirenz-based combination treatment. About 81% of the patients assigned to the raltegravir treatment arm had undetectable levels (below 50 copies/mL) of circulating HIV RNA compared to the 79% of patients treated with efavirenz.

According to the Centers for Disease Control and Prevention (CDC), in 2006 there were more than one million people in US living with HIV and AIDS. An estimated 33 million people are living with HIV and AIDS worldwide, and about 2.7 million new infections occurred worldwide in 2007. AIDS is one of the top causes of infectious disease-related mortality worldwide, responsible for approximately two million deaths in 2007 alone.

Gilead Sciences (GILD), Bristol-Myers Squibb, GlaxoSmithKline (GSK) and Abbott Labs (ABT) are the major players in this segment.

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Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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While the advisory committee voted 12-1 in favor of the efficacy of the vaccine, its safety profile got 11-1 in support from the panel. While the FDA is not bound by the advisory committee’s recommendation, it generally follows the suggestion.

Cervarix was found to be highly effective and was well tolerated in the prevention of cervical pre-cancers and cervical cancer related to human papillomavirus (HPV) types 16 and 18, in girls and young women. Types 16 and 18 are the two most common virus types known to cause cervical cancer.

The vaccine is currently approved in nearly 100 countries around the world, including the 27 member states of the European Union, Australia, Brazil, South Korea, Mexico and Taiwan. Glaxo is seeking approval in more than 20 additional countries including the U.S. and Japan.

Approval in the U.S. would open up a very large market for the product, which recorded £125 million in global sales in 2008. Once approved, Glaxo will compete directly with Merck’s (MRK) Gardasil. Although Merck beat Glaxo to the market, we believe Cervarix comparatively offers a broader base, has more potent protection and could achieve peak sales of approximately £1.5 billion.

Glaxo has presented very encouraging data against genotypes that account for 70% of cervical cancer cases and management believes that Cervarix may offer protection against several other genotypes that could increase this figure to 80% of cervical cancer cases.

The American Cancer Society estimates that about 11,000 women will be diagnosed with cervical cancer and 4,000 women will die from the disease in 2009 in the U.S. Globally, more than 500,000 more women are expected to be diagnosed with cervical cancer and 280,000 women to die from it every year.

A response from the US FDA on Cervarix should be out shortly. We believe that US approval of Cervarix will significantly boost Glaxo’s vaccine segment revenue, which came in at £2.5 billion in 2008.

The Trade Deficit increased to $32 billion in July, expected to increase to $27.3 billion, following $27.5 billion in June (revised from $27 billion), and $26 billion in May.  July exports increased by $2.7 billion to $127.6 billion, offset by the increase in imports by $7.2 billion to $159.6 billion.  The increase in exports was a result of increased export goods by $2.7 billion - automotive vehicles, parts, and engines; capital goods; industrial supplies and materials; consumer goods; and other goods – and increased export services by $0.1 billion - other transportation (which includes freight and port services) and small increases in several other categories of services exports.  Imports increased by $7.0 billion – reflecting increases in imports of automotive vehicles, parts, and engines; consumer goods; industrial supplies and materials; capital goods; and other goods - and import services increased by $0.2 billion – increasing in categories of other transportation and travel.

The Commerce Department provided the July figures of the trade balance of the U.S. relative to selected trading partners, in billions of dollars, with surpluses in Hong Kong ($1.3), Australia ($0.7), Singapore ($0.7), and Egypt ($0.2).  Deficits were recorded, in billions of dollars, with China ($20.4), the European Union ($8.0), OPEC ($6.9), Japan ($3.9), Mexico ($2.9), Venezuela ($2.3), Canada ($2.2), Nigeria ($1.7), Korea ($1.0), and Taiwan ($0.7).

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Chicago, IL – September 1, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bayer AG (BAYRY), Bristol-Myers Squibb (BMY), Johnson and Johnson (JNJ), Sanofi-Aventis (SNY) and Pfizer (PFE).

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Here are highlights from Monday’s Analyst Blog:

A Step Forward for Bayer

The therapeutic area of Atrial Fibrillation (AF) is buzzing with news. We are pleased with the development made by Bayer Schering Pharma, a division of Bayer AG (BAYRY) in this field. The company completed patient enrollment in the phase III study for Rivaroxaban (Xarelto). The study aims to assess the efficacy and safety of this drug against Bristol-Myers Squibb’s (BMY) warfarin, which is primarily used for the prevention of stroke in AF patients.

The study is expected to include about 14,269 patients spanning over 45 countries with results due by next year. Atrial fibrillation is the most common heart rhythm abnormality in the US. An estimated 3 million people in the US have atrial fibrillation, which affects about one in 10 people aged over 70.

Rivaroxaban, jointly developed with Johnson and Johnson (JNJ) is also being studied for the treatment of venous thromboembolism (VTE) and deep vein thrombosis (DVT) (apart from AF). The drug is approved in the European Union (EU) for the prevention of venous blood clots in adult patients who have undergone elective (planned) hip or knee replacement surgery.

Xarelto was submitted in July 2008 for approval to the US Food and Drug Administration (FDA), and the agency’s advisory committee voted 15-2 recommending its approval in the US in March 2009. A final decision is expected later this year. Xarelto offers multi-billion dollar sales potential. Upon approval, J&J will market the drug in the US while Bayer holds ex-US marketing rights.

In July 2009, the US FDA approved Sanofi-Aventis’ (SNY) Multaq, the first new drug for AF to be approved in a decade. Viewing the high unmet need of the AF market, many companies have pipeline candidates this area. Merck is developing vernakalant intravenous for AF patients, for which it is seeking European Medicines Agency (EMEA) approval.

Moreover, Bristol-Myers and Pfizer (PFE) are co-developing apixaban in addition to Boehringer Ingleheim GmbH’s Pradaxa (dabigatran). Though warfarin is widely used to prevent blood clot, it has certain limitations like careful regulation of blood levels to prevent overdose and reaction with some green vegetables. Any of these drugs on approval has the potential to reach blockbuster status.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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The study is expected to include about 14,269 patients spanning over 45 countries with results due by next year. Atrial fibrillation is the most common heart rhythm abnormality in the US. An estimated 3 million people in the US have atrial fibrillation, which affects about one in 10 people aged over 70.

Rivaroxaban, jointly developed with Johnson and Johnson (JNJ) is also being studied for the treatment of venous thromboembolism (VTE) and deep vein thrombosis (DVT) (apart from AF). The drug is approved in the European Union (EU) for the prevention of venous blood clots in adult patients who have undergone elective (planned) hip or knee replacement surgery.

Xarelto was submitted in July 2008 for approval to the US Food and Drug Administration (FDA), and the agency’s advisory committee voted 15-2 recommending its approval in the US in March 2009. A final decision is expected later this year. Xarelto offers multi-billion dollar sales potential. Upon approval, J&J will market the drug in the US while Bayer holds ex-US marketing rights.
 
In July 2009, the US FDA approved Sanofi-Aventis’ (SNY) Multaq, the first new drug for AF to be approved in a decade.  Viewing the high unmet need of the AF market, many companies have pipeline candidates this area. Merck is developing vernakalant intravenous for AF patients, for which it is seeking European Medicines Agency (EMEA) approval.

Moreover, Bristol-Myers and Pfizer (PFE) are co-developing apixaban in addition to Boehringer Ingleheim GmbH’s Pradaxa (dabigatran). Though warfarin is widely used to prevent blood clot, it has certain limitations like careful regulation of blood levels to prevent overdose and reaction with some green vegetables. Any of these drugs on approval has the potential to reach blockbuster status.

The placebo-controlled trials were carried out in 4,500 patients spanning 10 countries. It evaluated the treatment in two studies, each of which covered a time span of 12 months and 6 months. Results showed that Daxas reduced COPD attacks by 17% per patient every year compared with a placebo and improved the volume of air that patients breathe out each second, a measure known as FEV1 by 48 millilitres.

Studies also showed additional benefits when Daxas was used with other treatments such as Pfizer’s (PFE) Spiriva and GlaxoSmithKline's (GSK) Advair. However, common side effects for PDE4 inhibitors (like diarrhea, nausea, weight loss and headaches) were noticed more in patients taking Daxas (67%) compared to placebo (62%).

Although Daxas is being developed by Nycomed, Forest Laboratories has its distribution rights in the US as per an agreement signed earlier this month. Forest paid $100 million upfront for the drug and will make another payment of $500 million after successful regulatory approvals and achievement of certain sales milestones.

The COPD market has huge potential as it is an under-diagnosed progressive lung disease which could be fatal in many cases. The World Health Organization (WHO) estimates about 80 million people suffering from moderate to severe COPD, which will emerge as the third leading cause of death by 2030. The positive outcome of the trial could fetch the drug approval from US and European Union regulatory authorities. Daxas could record robust sales on approval and would compete with GlaxoSmithKline's Advair (with sales of £4.1 billion in 2008) in the chronic COPD market.

Investors see Hungary becoming “significantly” less risky, allowing for further reductions in interest rates, central bank Deputy Governor Ferenc Karvalits said. “Over the past few months, international risk appetite has improved significantly, the risk assessment of the region and Hungary has stabilized, and this allows for further easing of monetary conditions,” Karvalits said in an interview on Kossuth Radio today.

The Magyar Nemzeti Bank lowered its benchmark interest rate by half a percentage point to 8 percent on Aug. 24 as it works to jolt the economy out of its worst recession in 18 years. The bank has shaved 1.5 points off the key rate since July as confidence rises in the first European Union nation to get a bailout. Hungary received 20 billion euros ($28.5 billion) in an emergency loan from the International Monetary Fund, the EU and the World Bank.

The country has a “good chance” to finance its budget deficit from the market and may not need the next installment of the IMF loan, Karvalits said. The forint weakened 0.3 percent against the euro and was trading at 268.82 at 7:48 a.m. in Budapest.

You see, one of the principal reason why Hungary is in such a mess is that as inflation shot up in the months leading up to the crisis Hungary chose to loosen its peg against the Euro. At the time, the rationale seemed wise albeit very bold. In an environment where investors were willing to take risk (i.e. hunting for yield) their objectives could be aligned with that of public authorities in the sense that the former got their yield whereas the latter got the nominal appreciation needed to keep inflation in check.

It did not work quite like that.

As the crisis hastened its grip on global markets and as its locus steadily moved to Eastern Europe the Hungarian Forint plummeted and lay bare the country's vulnerabilities in the context of balance sheet (on the liability) side denominated in Swiss Francs. The result was that Hungary crashed into a recession unable to tweak monetary policy downwards because of a fear that this would scythe the Forint and thus essentially bankrupt scores of households and companies. On the other, the government also had (and has) difficulties raising funds on international capital markets.

Now however things appear to have changed at least for a moment and Hungary's central seem poised to take advantage of the relatively benign market conditions to lower interest rates to support its ailing economy. The underlying idea is simple. If you believe that risk aversion is to stay low, the Forint should not be sensitive towards the lowering of nominal interest rates since after all the carry remains plentiful. In this way, my view is that Hungary's central bank is trying to claw back the control over monetary policy by locking in a lower interest rate for the Forint. The key question which we should be asking ourselves however is of course whether Hungary could actually be forced to raise rates further down the road to defend the Forint. Clearly, bets are being made inside Hungary at the moment that this is not the case.

This is very interesting in a practical as well as a theoretical sense as I have discussed for example in this post about carry trade and global monetary policy. More recently, Edward Hugh mused on the same topic (more or less) invoking the idea of the (eternal) triangle of monetary policy in an open economy context.

In the case of the Central Europe "four", Poland and the Czech Republic opted for maintaining their grip on monetary policy, thus accepting the need for their currency to "freefloat" and move according to the ebbs and flows of market sentiment. As it turns out this decision has served them remarkably well, since the real appreciation in their currencies which accompanied the good times helped take some of the sting out of inflation, while their ability to rapidly reduce interest rates into the downturn has lead to currency depreciation, helping to sustain exports and avoid deflation related issues.

The other two countries (Hungary and Romania), to a greater or lesser degree prioritised currency stability, and as a result had to sacrifice a lot of control over monetary policy, in the process exposing themselves to the risk of much more violent swings in market sentiment when it comes to capital flows. Having been pushed by the logic of their currency decision towards tolerating higher inflation, they have seen the competitiveness of their home industries gradually undermined, and as a consequence found themselves pushed into large current account deficits for just as long the market was prepared to support them, and into sharp domestic contractions once they were no longer disposed so to do.

Edward's account here is important since it alerts us to the fact that it was only at the very end that e.g. Hungary opted for float because it was believed that it would make the inflation problem go away. At that point however, the structural imbalances and essentially damage were already embedded in the system of course. Nevertheless, it is unequivocally the fact that Hungary, at the moment, is attempting to benefit from the relative benign market conditions which means that risk aversion remains relatively subdued.

Elsewhere in Market Land ...

If our little trip to Hungary suggests that risk is on, if only a little bit and potentially in the case of Hungary news elsewhere suggest that the waters are more choppy. Of course, none of this is earth shattering by any means of the word, but since much, if not everything, seems to be revolving around China at the moment it seems worthwhile to dwell at recent news on how China are expected to "tweak" its hitherto lax lending policies to skim the worst of the mounting bubble (quote below from Bloomberg).

China’s banking regulators are “tweaking” lending policies to remove “froth” from the system while growth remains the top priority for policymakers, according to Royal Bank of Scotland Group Plc. The goal is to manage risk exposure among banks and asset quality by checking lending from going into A-shares traded on the mainland and properties, Wendy Liu, Hong Kong-based head of China research at RBS ABN Amro, said in a report dated yesterday.

(...)

The banking regulator sent draft rule changes to banks on Aug. 19 that would require lenders to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital, said the people, who have seen the document and declined to be named as the matter is private. This may cut lending by as much as 700 billion yuan ($102 billion), China International Capital Corp. said Aug. 24.

Of course, the main bias of the Chinese stimulus program and thus the authorities' objective remain one of promoting growth through the expansion of domestic investment and, one would assume, consumption. As RBS ABN Amro's Wendy Liu is quoted of saying; "policymakers have a far greater tolerance for asset-price appreciation over the medium term than before". That sounds about right to me even if I am no sage, at all, on China.

What is interesting in the case of the recent news from China was also the following piece by Bloomberg whose headline (Yen Strengthens as China Policy Concern Spurs Demand for Safety) makes a direct link between policies in China and risk sentiment in the market and thus also the movement of the Yen and the USD (remembering of course the narrative that repatriation of profits may ultimately be the main driver of the Yen at the moment).

The yen rose for a third day against the euro in the longest stretch of gains since July on concern Chinese production curbs would slow economic recovery, fanning demand for the relative safety of Japan’s currency. The currency gained versus major counterparts including the pound on speculation Japan’s exporters are repatriating earnings to take advantage of a new tax law. A government report today may show a faster contraction in the U.S. economy than previously estimated.

“We have talks from China cutting back expanding, trying to sort out the balance sheet and prevent too much reckless lending,” said Peter Frank, a London-based currency strategist at Societe Generale SA. “But domestic factors, like capital repatriation, are driving yen’s strength right now.”

Whether there is a history to be made here is debatable, but one thing is certain. China seems to have decidedly taken center stage in the global market discourse. Finally and essentially as a small footnote, yours truly took notice of the fact that despite the decidedly positive sentiment in the core of Europe at the moment on the back of the Q2 GDP print and upbeat confidence readings in Germany, aggregate retail sales continued their steady decline.

Whether all this signifies that risk is "on" or "off" I will allow the reader to decide for themselves. Personally, I am still bearish, but it is difficult to deny that the relative calm and positive environment that has prevailed since spring seems rather strong. I would expect sentiment to change once we return to "normal" in Q4 once the elections in Germany and Japan have been resolved and, more importantly, once OECD stimulus packages start to wane. Most importantly however, there is the situation in Southern and Eastern Europe still loom as the most likely harbringers of, if you will, black swans in which case risk almost surely would be off.

The FDA had to initiate the review process as the agency received about 32 cases of liver problems (between 1999 and 2008) in patients taking the drug in either forms, among which twenty-seven were hospitalized with six of them suffering from liver failure. The most common symptom reported was jaundice, which leads to yellowing of the skin or eyes along with stomach pain and weakness.

The obesity management drug Xenical got FDA approval way back in 1999 while the OTC version was approved in 2007. At present, orlistat has approval in approximately 100 countries with a recent (January 2009) European Union (EU) approval for the OTC version.

Alli garnered ₤75 million (approximately $122 million) in sales for GlaxoSmithKline last year and Xenical contributed 502 million CHF (approximately $473 million) in revenue for Roche. We believe the FDA review will not impact the company much as the drugs do not contribute significantly to the top-line, but in the short-term demand will be hampered.

Although no direct association between the drug and the liver problems has been established yet, no doubt the statistics mentioned earlier is a major concern for all the patients taking the drug. Since the FDA has asked the patients to continue taking orlistat and to report side effects, if any, we would like the agency to come to a conclusion fast as many lives are at stake.

The new drug application (NDA) for the drug is pending since May 2007. Protocol related issues came up even during the initial stages. In November 2008, the FDA issued a Complete Response letter asking J&J to conduct additional audit work of clinical investigation sites and to address questions related to site monitoring.

The latest decision by the FDA proves that the company has not been able to convince the agency yet. Some of the violations include inability to ensure proper storage of the drug while patients were using it at home, failure to maintain proper documents on the dosage, not examining all the patients thoroughly, enrolling some patients who did not meet its own eligibility criteria for the study and hiring unqualified investigators.

Apart from the postponement of the FDA’s decision, the European Union (EU) also delayed a ruling on the drug last February. The review process has been halted until a Good Clinical Practice inspection is completed. The drug was launched in Canada and Switzerland last year under the trade name Zeftera.

The concerns raised by the FDA will push back the NDA approval. At present, Johnson & Johnson has 15 working days to explicate its corrective action. The FDA has threatened to take “regulatory action" if the company fails to give a detailed response. We hope J&J comes up with a comprehensive map of the course of corrective action to satisfy the FDA.

Quarterly revenue came in at $5.5 million, representing a 10% decline from the comparable quarter in 2008. Sales for the full year fell by 13% to $25 million.

The narrower quarterly loss was primarily attributable to lower spending on research and development. The company spent $21.3 million towards research and development for the quarter for the clinical advancement of its wholly owned drugs versus $28.4 million in year-ago quarter.

Last January, Array had announced a restructuring plan of scaling down its research and development costs and accelerating partnership initiatives to ensure sustainable growth under current market conditions.

The company’s proprietary pipeline is primarily directed at drugs to treat cancer, inflammatory and metabolic diseases. It also collaborates with leading pharmaceutical and biotechnology companies like Celgene Corp. (CELG), AstraZeneca Plc (AZN) and Genentech to discover and develop drug candidates across a broad range of therapeutic areas.

Array also announced on the same day that its diabetes drug, ARRY-403, met the main goals of an early-stage trial. The drug, studied in 41 type-2 diabetes patients satisfied the primary and secondary goals of safety, pharmacokinetics and glucose control. Array is planning to initiate a new study in type 2 diabetes patients to evaluate the effects of the drug over a 10-day period.

The type-2 diabetes market has strong growth potential, with Decision Resources projecting a jump from $15.3 billion in 2008 to $27.8 billion in the U.S., the European Union and Japan in 2018. Growth will be driven primarily by expanding drug-treated population and launching several novel agents.

Array possesses an intriguing pipeline for cancer, inflammatory and metabolic diseases. However, given that most products are early-stage and the company relies on third-party clinical support, Array possesses a higher risk profile than most investors may be interested in undertaking.

While the advisory panel unanimously gave its stamp of approval to the injectable drug for prevention of bone fractures in women with postmenopausal osteoporosis, it stated that the drug should only be used by patients facing the highest risk of fractures. The ruling was based on safety and efficacy data from 30 studies of the drug involving more than 12,000 patients.

However, the panel did not approve use of the drug in the prevention and treatment of bone loss in women with breast cancer undergoing hormone ablation. It demanded additional data to ensure that denosumab would not hasten tumor growth in such patients, but supported use of the drug for prostate cancer as it appeared safer for men.

The committee also did not approve Prolia as a preventive measure for women with low bone density. The panel asked Amgen to provide more detailed data on denosumab before recommending it to patients who do not suffer from bone disease. It advised Amgen to submit a Risk Evaluation and Mitigation Strategy for Prolia, which could include a medication guide and a healthcare provider communications plan.

Even though the panel's advice is not binding on the FDA, it usually follows the ruling. The agency has set a Prescription Drug User Fee Act (PDUFA) action date of October 19. Prolia is also under review in the European Union, Australia and Switzerland, where GlaxoSmithKline (GSK) will market the potential multi-billion dollar blockbuster drug.

Despite only a partial nod from the panel, we feel that Amgen will be able to address safety concerns on Prolia and position it for blockbuster status. With all key products set to lose patent protection over the next few years (Enbrel - 2012, Epogen - 2013, Neupogen - 2013, Aranesp - 2014, and Neulasta – 2015), the company is depending on the approval and successful commercialization of denosumab.

We believe the candidate has potential to emerge as a leading cure for osteoporosis and will cater to a huge market, once launched. Osteoporosis affects about 10 million Americans, while nearly 45 million people are at risk. Global sales of osteoporosis medication hit $8.4 billion last year, including vitamin brands and drugs like Glaxo’s Boniva and Merck's (MRK) Fosamax.

We are bullish on denosumab, but any hiccup, either with respect to a delay at the FDA, a miss in any of the other ongoing late-stage programs, or safety concerns post-launch, will weigh heavily on the shares. We have a Neutral rating on Amgen.

The narrower quarterly loss was attributable to the licensing payment from Bayer and lower expenses. Revenue of $5.5 million came from recognition of a part of the $35 million upfront payment under the Bayer agreement on development of MEK inhibitors for treatment of cancer and other indications. Ardea had registered no sales in the year-ago quarter.

Operating expenses for the quarter fell 19% to $13.2 million primarily on lower costs for discovery research since Ardea is concentrating its resources on development of its gout candidate, RDEA594, which is in mid-stage study. The decrease was partially offset by restructuring charges of about $0.7 million associated with the 47% work-force reduction.

About 3 million to 5 million people in the U.S. and approximately 5 million people in the European Union suffer from gout, which is the most common form of inflammatory arthritis in men over 40. The incidence and severity of gout is increasing in the United States. There was a 288% increase in gout-related hospitalizations from 1988 to 2005.

Gout, also known as metabolic arthritis, is a painful and debilitating disease caused by abnormally elevated levels of uric acid in the blood stream. This causes deposition of uric acid crystals in and around the connective tissue of the joints and in kidneys, leading to inflammation, formation of disfiguring nodules (tophi), intermittent attacks of severe pain (acute flares) and kidney damage (nephropathy).

However, we are concerned about Ardea’s weak pipeline. Moreover, since RDEA594 is still in early stages of development, it is associated with higher risks. The company will also face tough competition from big players like Amgen (AMGN), Eli Lily (LLY) and Genentech (now part of Roche (RHHBY)).

While the recently signed agreement with Bayer is a positive for the company as it strengthens its balance sheet dramatically, we remind investors that Ardea is still an early-stage development company and has a long way to go to bring any product into market.

Quarterly net sales declined 13.6% year over year to $2.7 billion due to the pass-through of lower overall dairy commodity costs, despite positive contributions from acquisitions and volume growth in Fresh Dairy Direct and modestly lower sales in the WhiteWave-Morningstar business.

Net sales in the Fresh Dairy Direct segment declined 16.0% as the company passed some of the lower dairy costs to customers but was partially offset by continued volume growth. Raw milk prices were 41% lower compared to the prior-year.

Net sales at WhiteWave-Morningstar fell 4.6% to $622 million, attributable to slower category growth and the company’s exit from a food service business in the Silk brand and some private label organic milk business in the U.K. The decline was partially offset by volume gains, especially in the yogurt and cottage cheese categories.

Net sales of Horizon Milk rose in low single-digits due to higher pricing and continued distribution expansion. International Delight and Land O’ Lakes also grew modestly in low single-digits.

Moreover, the company entered into an agreement to acquire the Alpro division of Vandemoortele N.V. during the quarter. The deal was fixed for a transaction price of approximately 325 million euros and was completed early in the third quarter. Alpro is the European leader in branded soy-based beverage and food products with strong brands like Alpro soya and Provamel. Alpro has five manufacturing facilities in Belgium, United Kingdom, France and Netherlands and employs approximately 750 people. Management believes that the acquisition provides great opportunity for the company to expand into new markets across the European Union. Hence, the acquisition establishes Dean Foods as a global leader in the soy-based beverages and food products, with leading brands and over $1 billion in combined retail sales.

Following the earnings release, management raised its guidance for fiscal 2009. Annual earnings are now expected to be at least $1.60 per share, roughly 20% above year-ago levels. Previous guidance was $1.55 per share.

Although commodity costs continue to be favorable, management is concerned about the continued competitive activity in fluid milk operations and is cautious regarding diminished commodity favorability in the future. Earnings for the third quarter are expected to be $0.30 per share.

Operating income decreased to $411 million in the second quarter of 2009 from $899 million in the year-ago quarter. This decline was due to the increase in costs and expenses on lower volumes both in the U.S. and Spain. Thus, net income stood at $187 million, versus $444 million in the second quarter of 2008.
 
Currently, the cement industry is suffering based on the probability of new rules to limit emissions from the energy-intensive kilns that are core to the business, and more so CEMEX, which is battling with leading cement maker in U.S. like France's Lafarge SA (LAFP) and Switzerland's Holcim Ltd (HOLN) in a difficult market. Moreover, the company lost its profitable Venezuelan operations in 2008, and needs to repay $4.1 billion of debt by the end of 2009 and the remaining in 2010 and 2011.
 
CEMEX has huge exposure to the U.S., Spanish and British construction businesses; countries that are experiencing a difficult moment in its real estate cycle at present. In fact, prolonged downturns in the residential sector and tight credit conditions have negatively affected all segments of the construction sector around the world. The private sector is shrinking and the U.S. and European housing sectors are facing a huge crisis.
 
Meanwhile, almost all major governments in the world, including the U.S., European Union, China and Brazil, have been trying to stimulate infrastructure investment in the coming quarters. We believe it is still too early to tell when these programs will provide immense demand to fuel growth for the company and generate cash flow to reduce its huge debt and return to normal profitability. Thus, we are keeping our Sell recommendation on CEMEX.

XShares Advisors LLC has announced that it plans to close the AirShares EU Carbon Allowances Fund (NYSE Arca: ASO).

Entering July, the exchange-traded product had just $4 million in assets. ASO launched in December 2008 with nearly $5 million in seed money as an asset base.

ASO is actually a commodity pool that tracks a basket of exchange-traded futures contracts for European Union allowances (EUAs). Each contract provides for delivery of 1,000 EUAs at a specified price.

The ETF-like product, as AirShares refers to ASO, invests in futures contracts that expire each December beginning in 2009 and extending through 2012. As contracts approach their December expiration, the fund sells expiring contracts and replaces them with contracts of later expirations.

Since the commodities involved aren't physically deliverable, ASO can't be considered an ETF. But it acts like many exchange-traded commodities products that are popular in Europe.

Carbon exchange-traded products began appearing in the second half of last year to much hoopla. But their role in a diversified investment portfolio remains in debate since little in the way of research is out on how investing in such a niche corner of the market can impact long-term portfolios.

That has led to speculation that only traders well-versed in carbon emissions markets would trade such futures contracts through an exchange-traded product.

ASO was actually the second such fund of its type. Another type of fund, referred to as an exchange-traded note, was first to market in the carbon field. Last June, Barclays Capital gained first-mover status into the U.S. exchange-traded products market for carbon emissions with its iPath Global Carbon ETN (NYSE Arca: GRN).

Just like ASO, it trades throughout the day along an exchange. But GRN is priced a bit cheaper at 0.75%. As an ETN, however, GRN carries counterparty risk since it actually represents an investment in unsecured debt notes.

Interestingly, GRN isn't doing any better than ASO. It has less than $3 million in total assets.

In announcing the shuttering of ASO, XShares said that it "has considered the current market conditions and the growth prospects of the small fund in the foreseeable future and decided that liquidation was in the best interests of the fund and its shareholders."

The fund is eligible to de-register because it has fewer than 300 common stock shareholders of record.

Shareholders may sell their shares without transaction fees on or before July 31, the firm added in its statement. All shareholders of record remaining on that day will receive cash equivalent to the net asset value of their shares as of the same date, including any capital gains and dividends.

-- This article was submitted by IndexUniverse.com's Murray Coleman.

CHMP has recommended that rilonacept, an interleukin-1 blocker, be granted marketing authorization under exceptional circumstances. Such authorizations are granted to products on which comprehensive data cannot be provided by the company, which may happen due to the the rarity of the condition. The agency also asked Regeneron to  provide new information, if available, pertaining to the drug every year for review.

The company submitted a Marketing Authorization Application (MAA) with the EMEA for Arcalyst for the treatment of CAPS in the European Union in Jul 2008. We expect the agency to approve the drug for marketing in Europe in the fourth quarter of 2009. EU approval of Arcalyst could double its sales potential. Arcalyst has received Orphan Drug designation in the EU for the treatment of CAPS.

As a reminder, Arcalyst (Rilonacept) for CAPS was approved by the US Food and Drug Administration (FDA) in Feb 2008 for CAPS including Familial Cold Auto-inflammatory Syndrome (FCAS) and Muckle-Wells Syndrome (MWS) in adults and children aged twelve years and above. The drug is available in US markets since Mar 2008. Although CAPS is a small market, Regeneron will gain marketing experience from this indication.

In June 2009, the FDA approved Novartis’ (NVS) canakinumab, a fully human anti-interleukin-IL1β antibody, for CAPS in the US. This will have some negative impact on Arcalyst sales. Regeneron is entitled to receive royalties on worldwide sales of canakinumab on CAPS and other inflammatory diseases.

In addition to Arcalyst, which is Regeneron’s sole marketed product, the company boasts of six clinical development programs, including three late-stage clinical programs, targeting various oncology or eye-disorder indications.

We believe the current price provides an attractive entry-point to long-term investors.