Daily Archives: June 2, 2007

Genentech (DNA): When Good News Is Bad

Genentech (DNA) announced that a new study uncovered that fact that its Avastin cancer drug can improve survival among people with severe lung cancer when it is added to other treatments. It is good news for patients, and, one would think, for the company.

Unfortunately, the study also found "showed a lower dose of Avastin was just as good as a higher dose," according to The Wall Street Journal.

The drug makes Genentech a lot of money. The costs is capped at $55,000 a year for approved patients, but the figure is still eye-popping. Avastin sales were $1.7 billion last year.

Genentech’s stock is up over 400% in the last year, so, perhaps goodness is its own reward.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 2, 2007 – 9:25 am in Uncategorized

GE (GE): The Bear Case

Barron’s writes that GE’s (GE) stock, which has been trading in the mid-$30s could go to $50. The magazine’s article is fairly convincing. The company has sold off dogs like plastics and insurance. More of the company’s earnings will come from divisions outside Finance which brought in 51% of GE profits last year. (Financial services companies tend to carry a low multiple).

But, being even-handed, Barron’s mentions the problems with GE, which are substantial. The company is increasing its exposure in India and China. The reward in fast-growing economies could be tremendous. But, they are also regions subject to volatility.

Perhaps most damning is a look at GE’s P/E. It is forecast to be 17 this year and 15.1 in 2008. United Technologies stands at 16.6 this year and 14.6 next. And, Siemens (SI) is at 17.9 this year and 14.9 in 2008. It is hard, therefore, to make a case that GE is unusually cheap. It is not.

If mega-cap stock come back into vogue, GE could be helped. Barron’s points this out. But, that is a big "if". The markets tend to be efficient, especially with larger and older companies that have long histories and big followings on Wall St.

It is not an accident that GE’s stock is up only 25% over the last five years and the S&P has risen almost 50%. The Barron’s piece may give the shares a pop, but, that will be short-lived.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 2, 2007 – 8:37 am in Uncategorized

The Thugs At GlaxoSmithKline (GSK)

After bad-mouthing research attacking its diabetes drug Avandia, word now comes from The New York Times that GlaxoSmithKline (GSK) attempted to intimidate a well-known diabetes researcher, Dr. John Buse. The doctor had raised concerns as early as 2000 that Avandia could increase heart disease. But, Glaxo apparently put pressure on the doctor to keep his views to himself.

The most recent data on the drug was published by Dr Steven Nissen in the New England Journal of Medicine. Nissen’s work was attacked by Glaxo. Then ABC News ran a piece saying that the Nissen "sounding alarms about the diabetes drug Avandia claims he is the target of a smear campaign organized by a top Food and Drug Administration (FDA) spokesman." The FDA official recently worked at Johnson & Johnson.

Glaxo has insisted as recently as this last week that the dangers of the drug were no greater than other products in it class.

If that is true, why hush up the critics?

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 2, 2007 – 8:19 am in Uncategorized

Harry Potter, The Stock Investor (SCHL)

Scholastic Corp. (SCHL-NASDAQ) made an announcement after Friday’s close that the company was starting a $200 million accelerated share buyback plan via Deutsche Bank. The company expects to repurchase an estimated 14% of its currently outstanding common stock.

It looks like the company is using all of its Harry Potter profits to buyback and retire its stock, so in a sense the publisher is having Harry Potter user his allowance buy stock in Scholastic Corp.  The stock closed up 2% at $32.51 on Friday and was basically unchanged in after-hours trading.  The 52-week trading range is $24.99 to $37.08.

Amazon.com announced that it has already secured 1 Million pre-orders on May 8 for the last Harry Potter novel called "Harry Potter and the Deathly Hallows."  Amazon has reduced its price from $18.99 to $17.99, which is supposed to be a 49% discount.  This was after 95 days of pre-orders, and Amazon said it took 174 days for the sixth Harry Potter book. 

So, Scholastic is already counting its chips.  Does anyone really believe that this will be the last Harry Potter novel?

Jon C. Ogg
June 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 2, 2007 – 7:01 am in Entertainment, Shareholder Issues, Stock Buybacks,

Cramer Thinks Navteq Could Get a Bid

Last night on CNBC’s Mad Money, Jim Cramer had an interesting thought regarding merger rumors and speculation.  it was his ‘Speculation Friday" after all.  He surmized that Navteq Corp. (NVT-NYSE) is potentially in-play.  Because of the fact that Navteq is inside the digital mapping systems for Google’s (GOOG-NASDAQ) maps, Cramer thinks that Microsoft (MSFT-NASDAQ) could actually trump Google by acquiring the company. 

This would be an interesting strategy and would create some disarray in the Google Earth enironment.  But the question is how much would it be worth for Microsoft to do this, because the market cap of Navteq is more than $4 Billion already.  This stock closed down 0.6% Friday at $42.57, up from $37.27 on Tuesday.  This wasn’t because of a merger rumor but was because the CEO of Navteq gave positive data presentations at a Lehman conference this week.  This would be an interesting buy, but even after Microsoft spent $6 Billion or more for aQuantive (AQNT-NASDAQ) it would be a wonder if they just teed up another few billion here just to backdoor google.

Jon C. Ogg
June 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 2, 2007 – 6:16 am in Cramer, Mergers and Buy Outs, Rumors, , , ,