Daily Archives: July 14, 2007

Is Tribune (TRB) But-Out In Trouble?

The publisher of the Los Angeles Times, part of The Tribune Company, has issued an internal memo saying that the newspaper’s cash flow dropped 27% during that last quarter, according to Bloomberg. The paper is the largest in the company’s chain.

Based on figures put out earlier by the Tribune,  ad sales could be off as much as 10% for the quarter.

Sam Zell has put together a deal valued at $8.2 billion to take the company public. The deal is highly leveraged so that any drop in cash flow would make that firm’s ability to keep up with debt service more uncertain.

Zell is bound to look at forecasts for the third quarter to see if the situation is getting worse with time.

If so, the deal could easily die.

Douglas A. McIntyre

Posted on: July 14, 2007 – 5:50 pm in Uncategorized,

Verizon Wireless Revisited (VZ)(VOD)

Proxy advisory firm Glass Lewis has come out in favor of an activist proposal to put Vodafone’s (VOD) share of Verizon (V) Wireless "in a tracking stock or a new holding company", according to WSJ.com. The UK cellular company has a minority piece of the US venture.

There are arguments on both sides, but perhaps the best one in favor Vodafone keeping the minority position is that its shares do so much better than Verizon’s.

Verizon’s best business is its cellular operation. It landline segment is being eaten by VoIP competition. Its fiber-to-the-home products are still immature. If Verizon would spin-out its wireless operation, it might make sense for Vodafone to go along and put its piece into the new public company. As a whole, that entity should do better in the market.

But, having a tracking stock which is a minority interest in a division of a public company doesn’t really have a benefit. Verizon Wireless may pay-out some dividend to Vodafone from time-to-time, but there is no guarantee that a tracking stock would then redistribute those sums.

Is owning a piece of the US wireless company part of the reason that Vodafone’s shares do better than Verizon’s? That is impossible to tell.

But, with its stock up 60% over the last year, Vodafone’s shareholder have very little reason to push for a restructuring of the company, especially one with such an unclear outcome.

Douglas A. McIntyre

Posted on: July 14, 2007 – 1:13 pm in Uncategorized, ,

Results-Based Pharma (JNJ)(GSK)

Imagine that if an aspirin did not get rid of you headache. And, the company that made the pain killer gave you your money back.

A new proposal by Johnson & Johnson (JNJ) is for the company to provide its cancer drug Velcade on the basis that if it does not shrink tumors, the money for the treatment would be refunded. According to The New York Times, Velcade costs $48,000 per patient. The paper says that Big Pharma company GlaxoSmithKline (GSK) is looking into similar arrangements in other countries in Europe.

In an age where more and more health care is controlled by governments and health management organizations, the practice could have far-reaching implications. The overall goal of those who control health care is to drive costs down. The criticism of the movement is that it can deny patients essential care.

Payment by results could offer both sides of the debate some relief.

It could also offer Big Pharma the chance to lobby for a change to its most vexing threat–generics. When drugs go "off patent", they are often become the preferred alternative based solely on price. These generic drugs are made by companies that do not have the R&D expenses of the firms that created and tested them. Big Pharma puts billions into R&D. And, this ofter creates drugs that bring in billions in revenue. But, eventually, those drugs find competition in the form of generic versions.

Big Pharma may want to broker a deal. Pay us for medical results. We will take the financial risks of R&D and for the efficacy of the treatments. In exchange, let us keep the income from what works instead of eventually turning it over to lower-cost competitors.

A construct like that could spur R&D and save money for patients and those who insure them.

As we are entering an increasingly dangerous world of multi-drug resistant pathogens (e.g. tuberculosis, antibiotic resistant staph) and new diseases (e.g. avian flu, SARS, ebola) requiring huge expense to create vaccines and treatment, the public will suffer unless there are incentives for Big Pharma to take on additional risk.

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

Posted on: July 14, 2007 – 9:31 am in Uncategorized, ,

This Week on StockHouse July 9 to 13

For a quick run-down on the top stocks, posters, blogs, and discussions, check the StockHouse Top Five (http://www.stockhouse.ca/shfn/article.asp?edtID=19944).

Sometimes an unexpected news release moves your trading stock, but Don Rodgers wrote in his Trading Discipline column that it’s even more important to know when to sell when faced with market surprises.

(http://www.stockhouse.ca/shfn/editorial.asp?edtID=19942)

The profits have been made from the earliest stage of the uranium bull market, but the Casey Report offered several pointers to help investors make money in the next stage of the uranium exploration cycle. (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19949)

While Steven Saville is long term bullish on commodities, it’s hard to convince him that the price increases in the metals mining sector have nothing to do with the rise in inflation. (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19947)

The editors of the Bio Check column noticed that big pharma companies have been aligning themselves with developers of RNAi technologies recently. (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19948)

Shares of the Medipattern Corporation (TSX: V.MKI) soared when the company announced a partnership with a unit of GE Healthcare (NYSE: GE). Reporter Sean Mason checked out the buzz on the company’s BullBoard, and found users optimistic about the maker of computer-aided diagnosis solutions. (http://www.stockhouse.ca/shfn/article.asp?edtID=199460)

Harry Boxer, this week’s Weekly Wizard, picked four stocks with charts that could improve in the intermediate term. (http://www.stockhouse.com/shfn/editorial.asp?edtID=19952)

Greg Silberman answered the very important question: where should I be investing my money anyway? He wrote that oil stocks are likely to outperform gold stocks in the next six months. (http://www.stockhouse.ca/shfn/article.asp?edtID=19937)

Danny Deadlock argued that Rand A Technology (TSX: T.RND), a services and technology provider for engineering companies, could be perceived as a takeover target (http://www.stockhouse.ca/shfn/article.asp?edtID=19936).

And the Micro-cap Spotlight reiterated its price target for Financial Content (OTC: BB: FCON), noting a big jump in the company’s revenue.  (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19941).

All you need to do, wrote Totally Technology columnists Leon Hamerling and J. Paul, is look at the performance of the Nasdaq 100 ETF, the QQQQs, or cubes, to see that technology innovation is thriving in North America. http://www.stockhouse.ca/shfn/article.asp?edtID=19957

One vitally important tool for investors who are doing due diligence on interesting companies is the EDGAR website, the repository for all of the SEC-required filings. The Financially Fit crew detailed the key filings that investors should peruse. (http://www.stockhouse.ca/shfn/article.asp?edtID=19955)

John J. De Goey was irate at the suggestion that a mutual fund fee cap is a step forward in mitigating costs for investors. (http://www.stockhouse.ca/shfn/article.asp?edtID=19956)

Posted on: July 14, 2007 – 9:00 am in Uncategorized

Better Medicine For Boston Scientific (BSX)

Boston Scienfitic (BSX) has a deal to "settle all pending federal lawsuits against the company alleging harm from faulty defibrillators and pacemakers for $195 million," according to The Wall Street Journal. It could have been much worse, so the company’s shareholders finally have an event that they can cheer about because the company had pegged the cost at over $700 million.

The tip is gone, but the iceberg is still there. Suits by state authorities are still open and could be for some time. 

But, it does lessen the company’s exposure to its current two-front war. Medical researchers have claimed that the company’s stents can cause blood clots and may pose severe health risks. Stent sales have fallen and its is unclear whether any liability cases could be filled on this matter in the future.

Two-front wars are rarely won. BSX is wise to do what it can to put the pacemaker issue behind it.

Douglas A. McIntyre

Posted on: July 14, 2007 – 7:16 am in Uncategorized,

Kraft (KFT): Raiders Of The Lost Art

Carl Icahn appears to have joined Nelson Peltz as a shareholder in Kraft (KFT). Peltz is going to meet with Kraft management this week to get the company "to focus on its grocery and frozen-foods brands, which include cheese and pizza, sell its Post cereals and Maxwell House coffee businesses and use the proceeds from those sales to buy back shares."

If Icahn and Peltz decide to team up, it might get a bit sauna-like at Kraft headquarters. Peltz and Icahn are almost all that is left of the raider culture from 25 years ago. But, they are past masters of their art. Icahn has been particularly busy lately with Lear (LEA), Blockbuster (BBI), and Motorola (MOT). Even if he does not always get his "seat on the board", he often forces change from the outside,

Year-to-date, Kraft’s stock is flat, but that is only because the raiders have jumped in and sent up the shares recently. The company’s market performance is not going to be a terribly good defense.

It will have to come up with something else to encourage shareholders to be patient.

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

Kraft

Posted on: July 14, 2007 – 7:07 am in Uncategorized, , , ,