The unofficial closing bells put the DJIA up nearly 33 points to 12,392.54 (0.26%), the NASDAQ rose more than 2 points (0.09%) to 2,676.56, and the S&P 500 rose 0.23% or nearly 3 points to 1,280.70.

There were several analyst upgrades and downgrades today, including Costco Wholesale Corp. (NASDAQ: COST) cut to ‘underperform’ at Bernstein; Exxon Mobil Corp. (NYSE: XOM) reiterated as ‘buy’ at Goldman Sachs; Akamai Technologies Inc. (NASDAQ: AKAM) cut to ‘sell’ from ‘neutral’ at Citigroup; Pandora Media Inc. (NYSE: P) started as ‘buy’ at Needham; Southern Copper Co. (NYSE: SCCO) cut to ‘hold’ at Deutsche Bank; and Merck & Co. Inc. (NYSE: MRK) downgraded to ‘hold’ at Jefferies.

Earnings reports of note since markets closed Friday include: Acuity Brands Inc. (NYSE: AYI) is up nearly 9% at $54.79; and Cubist Pharmaceuticals Inc. (NASDAQ: CBST) is down -0.55% at $39.95. After markets close today bellwether Alcoa Inc. (NYSE: AA) is expected to report an EPS loss of -$0.02.

Other standouts from today include the following stocks:

Inhibitex Inc. (NASDAQ: INHX) is up more than 140% at $23.70 after posting a new 52-week high of $24.08 earlier today. The drug company has agreed to be acquired by Bristol Myers Squibb (NYSE: BMY) for $2.5 billion ($26/share in cash).

Pansoft Co. Ltd. (NASDAQ: PSOF) is up nearly 56% at $3.13. The Chinese enterprise software company received a buyout offer from Timesway Group Ltd, which is controlled by Pansoft’s chairman, for $3.76/share for the shares Timesway does not already own.

Idenix Pharmaceuticals Inc. (NASDAQ: IDIX) is up more than 36% at $9.59 after posting a new 52-week high of $10.39 earlier today. The drug maker’s hepatitis C drug got a postive report on an interim drug trial, the same categoy of drug made by Inhibitex. More coverage here.

Netflix Inc. (NASDAQ: NFLX) is up more than 14% at $98.62. The video rental and streaming company launched its streaming service in the UK and Ireland today. We have more coverage here.

Theravance Inc. (NASDAQ: THRX) is down more than -19% at $16.27. The biopharmaceutical firm reported that a new drug to treat asthma and other pulmonary diseases performed no better than an existing drug in a clinical trial.

Lantronix Inc. (NASDAQ: LTRX) is up more than 28% at $2.95. The networking products maker launched new wireless printing products aimed at devices that use the iOS operating system software from Apple Inc. (NASDAQ: AAPL).

Stay tuned for Tuesday. San Francisco Fed President John Williams and Kansas City Fed President Esther George are giving speeches. Here are the noteworthy events on the schedule (all times Eastern):

• 7:30 a.m. – NFIB small business optimism index
• 11:30 a.m. – 4- and 52-week Treasury bill auctions
• 1:00 p.m. – 3-year Treasury note auction

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Amgen’s current dividend is 2.3%, which is rather high for a biotech stock. It also should be noted that the $64.00 price is above the stock’s old former rangebound levels of $50.00 to $60.00. Pfizer currently yields 3.7%, but that is about to rise to closer to 4%, and Merck yields about 4.50% after its dividend hike.

The question for 2012 is simple: Which biotech stocks will be among the second waves to initiate paying a dividend? By our count, these are the biotech outfits that might entertain following Amgen’s dividend path: Biogen Idec Inc. (NASDAQ: BIIB), Celgene Corporation (NASDAQ: CELG), Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), PDL BioPharma, Inc. (NASDAQ: PDLI), Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN), and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX).

We would have evaluated the chances of Gilead Sciences Inc. (NASDAQ: GILD) initiating a dividend, but this $11 billion proposed buyout of Pharmasset, Inc. (NASDAQ: VRUS) is likely to keep Gilead tied up for quite some time.

Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is close to all-time highs above $70 and is now worth a whopping $13.2 billion. Estimates are $1.30 EPS for 2011 and $1.66 EPS for 2012, making this one have a much higher valuation while it is still rapidly growing. Some investors may expect that it could start paying out a dividend, but it is too soon by our take today, even with a $445 million balance of cash and liquidity with almost no long-term debt.

Biogen Idec Inc. (NASDAQ: BIIB) has estimates of $5.89 EPS in 2011 and $6.31 EPS in 2012. The company had only about $3 billion in cash and investments at the end of September versus a current market cap of about $27 billion. 2011 was the year that investors decided to give up on worrying about the very rare PML cases in TYSABRI, and that allowed Biogen shares to rise almost 60% in 2011. If Biogen decides to get off the no-dividend bandwagon soon, we would only look for an initial payout of $1.00 on an annualized basis for a while.

Celgene Corporation (NASDAQ: CELG) may still be too new of an earnings story to start expecting a dividend. The earnings estimates are $3.80 EPS in 2011 and $4.51 EPS in 2012. With almost $2.6 billion in cash and investments, its market cap is larger than Biogen’s at $30 billion.

Cubist Pharmaceuticals Inc. (NASDAQ: CBST) managed an incredible breakout year as its drugs treat hospital-borne infections, with nearly a 100% share price gain in 2011. The market cap is now about $2.45 billion, and it had nearly $1 billion in cash and liquidity before a recent $221 million acquisition versus about $450 million in long-term debt. Cubist probably could start to pay a dividend if it wants to, but the company has decided to be an acquirer rather than hoarding cash or going defensive. Chances are that it may need to hold on to its cash while it absorbs Adolor and anything else it is considering.

PDL BioPharma, Inc. (NASDAQ: PDLI) has been a dividend payer from its patent royalties, but some payments have been one-time payments until its most recent $0.15 payout for each of the past four quarters. The company also recently forecast a 5% revenue drop and investors are already braced for lower royalty payments. The company recently lost its CFO after only about three years on the job and we really do not like to see CFOs leave biohealth companies. Estimates are $1.18 EPS for 2011 and $1.38 EPS in 2012, but it has about $225 million in cash and liquidity versus a market cap of $867 million. The company may just stick with its current payout structure’s high yield as is until (or if) it can secure another large patent license.

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) is worth some $5.1 billion or so in market capitalization and is fresh off the news that it settled with Genentech over U.S. opthalmic sales of the eye drug EYLEA with a patent case still brewing, but with Regeneron agreeing to pay out $60 million if sales reach $400 million and it will pay royalties out as well. With cash and liquidity of near $500 million at then end of September we think it is a bit premature to ask this one to start shelling out its cash to shareholders yet, considering it is still expected to have a wide loss in 2012.

Vertex Pharmaceuticals Inc. (NASDAQ: VRTX) is so far off of highs now that it seems unlikely investors are expecting much on the dividend front. The company is back on the path of growth after some changes and stumbles, and now its market cap is almost $7 billion. With this one it just feels too soon to expect any dividends in reality. We could analyze all we want, but its new revenue growth is challenged by a cash balance of just over $800 million versus $400 million in long-term debt. What is interesting is that Vertex’s $0.30 EPS expected for 2011 is expected to be $4.55 EPS in 2012. It had a loss of $3.77 EPS in 2010. Maybe after another year or so we can evaluate its future dividend strategy.

After reviewing the great biotech sector’s larger components, it sure does not sound like many other than Biogen Idec Inc. (NASDAQ: BIIB) are really new prime-time dividend candidates for 2012, other than the high payout of PDL BioPharma, Inc. (NASDAQ: PDLI).

JON C. OGG

Cubist Pharmaceuticals Inc. (NASDAQ: CBST) is pulling a rabbit out of its hat.  Cubist was once believed to be a solid acquisition candidate when its share price was much lower, but now the company has come out and announced that it is acquiring Adolor Corporation (NASDAQ: ADLR) for about $190 million in a deal that could rise to $225 million if certain milestones are achieved. Adolor loves the price as the shares are up 129% at $4.40 today.  That is above the $4.25 buyout price, but the possible upside for the milestones is why.

HealthSpring Inc. (NYSE: HS) is being acquired for $3.8 billion by CIGNA Corporation (NYSE: CI) in a $55 buyout offer in close to a 35% premium.  Insurers continue to consolidate.  Elsewhere in healthcare, Coventry Health Care Inc. (NYSE: CVH) was listed as one which could be acquired by Barron’s over the weekend and its shares are up almost 6% at $31.66 in conjunction with healthcare consolidation news and on hopes for more pin action.

Mattel Inc. (NYSE: MAT) is acquiring HIT Entertainment in a $680 million acquisition from Apax Partners and a private equity consortium.  Mattel’s market cap is $9.6 billion.  The deal locks up the Thomas & Friends toys.

Rightnow Technologies Inc. (NASDAQ: RNOW) is much more well known ”right now” since Oracle Corporation (NASDAQ: ORCL) has announced a buyout of the company.  This $1.5 billion purchase comes to $43.00 per share and the stock hit a new all-time high of $42.92.  RightNow is in cloud-based customer experience software products and services.

Sara Lee Corporation (NYSE: SLE) is a company that has been a rumored (and hoped for) buyout target for longer than one can easily recall in the food sector.  The company is selling off the majority of its food service coffee and tea operations to J.M. Smucker Co. (NYSE: SJM) for about $350 million.  Considering it is a $10.5 billion company by market capitalization, this is no real game-changer.

Elsewhere in M&A news, Anadys Pharmaceuticals Inc. (NASDAQ: ANDS) is at a year high of $3.68 and it now has a formal class action suit filed against the merger where Roche is set to pay out $3.70 per share. This was a $10 and higher stock in 2006.

NYSE Euronext, Inc. (NYSE: NYX) and its Deutsche Bourse merger is still hanging in the wind.  The merger has a hearing in the European Union on October 27 to address some of the concerns brought up by regulators.  At $26.70 today, this is way down from the highs above $41.00 over the last year.

JON C. OGG

A brief summary of the news and the after-hours reaction is available on each below.

American Express Company (NYSE: AXP) beat earnings estimates at $1.03 EPS versus $0.95 estimates.  Shares were down 1.2% today and shares are currently down another 1.2% at $45.59 in the after-hours session.

Buffalo Wild Wings Inc. (NASDAQ: BWLD) beats earnings at $0.61 EPS versus $0.63 EPS estimate; revenues rose over 30%; it sees meeting a goal of 13% unit growth and 23% net earnings growth for 2011. The dining, beer, and sports destination also sees 2012 with 12% unit growth and net earnings growth of 20% in 2012.  Shares fell 0.8% on the day but the stock is up 3.3% at $59.81 in the after-hours session.

Cirrus Logic Inc. (NASDAQ: CRUS) beats earnings but guided next quarter below estimates as it is seeing softness in some areas of business due to global economic issues.  Shares were down 5.5% at $17.01 on the regular trading day and shares are down another 12% at $14.73 in after-hours.

Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) beat $200 million in sales for the quarter and shares are up almost 8% at $39.33 after closing down 1.75% today.

eBay Inc. (NASDAQ: EBAY) met its $0.48 EPS target and sees $0.55 to $0.58 EPS versus $0.58 EPS targets in Q4.  Shares were down 2% on the day and down another 4.3% at $31.83 in after-hours trading. 

E*TRADE FInancial Corporation (NASDAQ: ETFC) is now up after having been down.  It appears to have met the $0.16 estimate but revenues were light; shares closed down 2.6% on the day but are back up almost 2% at $9.52 in after-hours.  No word on any merger, again.

Riverbed Technology, Inc. (NASDAQ: RVBD) may be getting its mojo back… It beat earnings and guided higher.  After falling 2.8% on the day shares are up over 11% at $25.10 in the after-hours and the 52-week range is $12.57 to $44.70.

Western Digital Corporation (NYSE: WDC) was down 9% today on Thai flood concerns and shares are down another 2% at $24.00 in the after-hours session despite $1.01 EPS.  The floods could impact they key quarter ahead.

Wynn Resorts Ltd. (NASDAQ: WYNN) was down over 5% on its own today and now the high-end casino operator posted $1.05 EPS versus $1.15 estimates even though revenues were in line and up 29%.  Shares are down another 5.2% at $123.48.

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JON C. OGG

Amerisafe, Inc. (NASDAQ: AMSF) named Bear of the Day at Zacks.
Bristol-Myers Squibb Company (NYSE: BMY) Raised to Buy at Goldman Sachs.
Broadcom Corporation (NASDAQ: BRCM) Raised to Market Perform at JMP Securities.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) Raised to Buy at BofA/ML.
Hovnanian Enterprises Inc. (NYSE: HOV) Cut to Underweight at JPMorgan.
Intel Corporation (NASDAQ: INTC) Raised to Buy at BofA/ML.
Johnson & Johnson (NYSE: JNJ) Cut to Neutral at Goldman Sachs.
KB Home (NYSE: KBH) Cut to Neutral at JPMorgan.
Lennar Corp. (NYSE: LEN) Raised to Buy at Citigroup.
Lululemon Athletica Inc. (NASDAQ: LULU) Started as Buy with $75 target at Argus.
MAKO Surgical Corp. (NASDAQ: MAKO) removed from Conviction Buy List at Goldman Sachs; this is one of the best performing stocks of 2011.
Netflix, Inc. (NASDAQ: NFLX) Raised to Neutral from Sell at UBS; Raised to Outperform at Wedbush.
On Assignment, Inc. (NASDAQ: ASGN) named the value stock of the day at Zacks.
ONEOK Partners, L.P. (NYSE: OKS) named Bull of the Day at Zacks.
Tesla Motors, Inc. (NASDAQ: TSLA) Started as Outperform at Robert W. Baird.
Time Warner. Inc (NYSE: TWX) Reiterated Outperform and $40 target at Credit Suisse.
Yahoo! Inc. (NASDAQ: YHOO) Raised to Buy at Stifel Nicolaus.
Youku.com Inc (NYSE: YOKU) Removed from Conviction Buy List at Goldman Sachs.

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JON C. OGG

The top earnings reports due in the coming week are from Alcoa, Inc. (NYSE: AA), Novellus Systems, Inc. (NASDAQ: NVLS), ADTRAN Inc. (NASDAQ: ADTN), Marriott International, Inc. (NYSE: MAR), Novagold Resources Inc. (NYSE: NG), Yum! Brands, Inc. (NYSE: YUM), Cubist Pharmaceuticals Inc. (NASDAQ: CBST), Google Inc. (NASDAQ: GOOG), J B Hunt Transport Services Inc. (NASDAQ: JBHT), JPMorgan Chase & Co. (NYSE: JPM), Citigroup, Inc. (NYSE: C), and Mattel Inc. (NASDAQ: MAT).

We have added color on each of these reports, along with showing trading data, Thomson Reuters estimates, and more.

Alcoa, Inc. (NYSE: AA) is due to report Monday and acts as the unofficial kick-off for earnings season.  It was one of those top 15 reports to follow for all of the summer earnings trends.  Estimates are $0.34 EPS and $6.32 billion in revenues; estimates for the next report are $0.34 EPS and $6.33 billion in revenues.  Shares are now trading around $16.17 and the 52-week trading range is $9.92 to $18.47.  With sowing in Japan and China, we will be giving Alcoa more or less “a pass” on the last quarter as long as it is not atrocious.  Mainly, investors need to focus on just how much of a bounce in orders are coming right now.  This has been a takeover-rumor stock as well, but we are not going to try to deal with the reality of that possibility. This one also made our value screen for the metals sector on Friday.

Novellus Systems, Inc. (NASDAQ: NVLS) reports on Monday and it is usually not a sector mover with its $3.2 billion market cap.  Estimates are $0.76 EPS and $352.3 million in revenues; estimates for the next report are $0.87 EPS and $363 million in revenues.  Shares are now trading around $35.89 and the 52-week trading range is $22.88 to $41.82.  Why we care is that it is the first of the equipment makers for circuits and chips to report, and it is frequent that investors try to look for cause and effect in the rest of tech.

ADTRAN Inc. (NASDAQ: ADTN) reports on Wednesday and will lead off the telecom and communications equipment makers in its report.  Estimates are $0.53 EPS and $179.4 million in revenues; estimates for the next report are $0.55 EPS and $187.2 million in revenues.  Shares are now trading around $41.98 and the 52-week trading range is $27.55 to $47.60.  Just like Novellus, analysts and traders will possibly look for cause and effect in its peers.  Keep in mind, its market cap is a mere $2.7 billion and these companies in the space are now subject to what we call “good hits and bad misses” in earnings.

Marriott International, Inc. (NYSE: MAR) reports this coming Wednesday and estimates are $0.37 EPS and $3.02 billion in revenues; estimates for the next report are $0.30 EPS and $2.88 billion in revenues.  Shares are now trading around $36.70 and the 52-week trading range is $29.80 to $42.56. With hotel rates running strong, it is hard to not notice that this stock is right in the middle of its 52-week trading range.

Novagold Resources Inc. (NYSE: NG) is due Wednesday and is more Canadian than U.S., but investors will try to use it as a bogey for the gold mining stocks as it is into exploration for gold, zinc, silver and other minerals.  Its market cap is only $2.3 billion.  As a reminder, Novagold was one of our fresh value hunt stocks as it is among the most sold-off gold stocks.  Estimates are in Canada and not widely followed in America.

Yum! Brands, Inc. (NYSE: YUM) estimates are $0.61 EPS and $2.70 billion in revenues; next quarter estimates are $0.84 EPS and $3.03 billion in revenues. Shares are now trading around $55.13 and the 52-week trading range is $38.43 to $57.04.  Yum! is really about China, and many are now using Yum!’s China market comments to try to make determinations about the discretionary spending for China’s consumer spending market.

Teva’s $81.50 offer per share in cash may seem like a low premium of only about 6% to the closing price on Friday, but this is about 12% higher than Cephalon’s earlier $73 per share offer.   More importantly, this is nearly a 40% premium to Cephalon’s pre-merger offers.  The boards of directors of Teva and Cephalon have each voted in favor of this merger.  What we are most curious about is simple… Which biotech and small pharmaceutical companies will be next to be acquired?

Celera Corporation (NASDAQ: CRA) is one we felt made sense for genomics, particularly when you consider that so much of Celera was raw cash.  At that time of the deal, we also updated several other genomic possible targets.

Cephalon was noted as a possible buyout target even back at the end of January, and we gave a list with explanations on each of the following and more:  Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN); Dendreon Corporation (NASDAQ: DNDN); Human Genome Sciences, Inc. (NASDAQ: HGSI); Cubist Pharmaceuticals Inc. (NASDAQ: CBST); United Therapeutics Corporation (NASDAQ: UTHR); Cadence Pharmaceuticals Inc. (NASDAQ: CADX); AMAG Pharmaceuticals, Inc. (NASDAQ: AMAG); and Sangamo Biosciences Inc. (NASDAQ: SGMO).  Details with explanations on that full list here.

Foreign buyers have an advantage of preying on US companies due to the incredibly weak U.S. Dollar and drug companies are looking to bolster sagging drug pipelines.  The deals will continue, but the real risk for biotech investors is that there will be very few quality companies with real earnings left to invest in.

Not all of these other companies will be acquired.  Some are too expensive though others offer a buyer a significant pipeline and emerging drug boost… for those willing to pay up.

JON C. OGG

Adobe Systems Inc. (NASDAQ: ADBE) Cut to Underperform at FBR.
Bank of America Corp. (NYSE: BAC) Kept as Underperform and named Bear of the Day at Zacks.
Blackboard Inc. (NASDAQ: BBBB) Cut to Underperform at BofA/ML.
BHP Billiton Ltd. (NYSE: BHP) Cut to Neutral at BofA/ML.
Cree Inc. (NASDAQ: CREE) Cut to Hold at Wunderlich; Cut to Sell at Kaufman Bros.
Crexus Investment Corp. (NYSE: CXS) Started as Outperform at Credit Suisse.
CTC Media, Inc (NASDAQ: CTCM) Cut to Neutral at BofA/ML.
Cubist Pharmaceuticals Inc. (NASDAQ: CBST) Raised to Outperform at Oppenheimer.
Goldman Sachs Group Inc. (NYSE: GS) Reiterated Hold but cut 2011/2012 estimates at Argus.
Huntington Bancshares Inc. (NASDAQ: HBAN) Maintained Neutral with $7.75 target at BofA/ML.
Intel Corporation (NASDAQ: INTC) Raised to Overweight at JPMorgan; Raised to Outperform at FBR; Reiterated Buy at Argus.
Noble Energy, Inc. (NYSE: NBL) Raised to Outperform at Wells Fargo.
Pan American Silver Corp. (NASDAQ: PAAS) Maintained Neutral with $46 target at BofA/ML.
PetroChina Co. (NYSE: PTR) Raised to Outperform as Bull of the Day at Zacks.
PG&E Corporation (NYSE: PCG) Raised to Conviction Buy List at Goldman Sachs.
VMware Inc. (NYSE: VMW) Maintained Underperform but target raised to $70 at Credit Suisse.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more. 

JON C. OGG

We have included some color on each if applicable and included Thomson Reuters estimates and price performance metrics.

Alcoa, Inc. (NYSE: AA) is out with earnings Monday after the close, and it is the first DJIA component and the one company that investors, traders, and speculators often try to use as a bogey for determining the strength of earnings season.  At a minimum, the company may be used as a tool to judge how other metals companies are doing. Thomson Reuters has consensus estimates of $0.27 EPS and $6.30 billion in revenues; next quarter estimates are $0.35 EPS and $6.29 billion in revenues.  Shares are around $18.00 in Friday afternoon trading and shares were trading at $16.49 about 90-days ago.

Wednesday morning we get to see financial powerhouse JPMorgan Chase & Co. (NYSE: JPM).  Jamie Dimon and friends will set the tone of how banking and financial firms are doing and how they see the current environment.  Thomson Reuters has consensus estimates of $1.16 EPS and $25.6 billion in revenues; next quarter estimates are $1.17 EPS and $25.22 billion in revenues.  Shares are around $47.00 in Friday afternoon trading and shares were trading around $44.00 about 90-days ago.

DragonWave Inc. (NASDAQ: DRWI) is after the close of trading on Wednesday, and this one is sometimes used as a proxy for how Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR) are doing.  That being said, we’ll leave it there for you to decide how tied these are. Thomson Reuters has consensus estimates for DragonWave of -$0.16 EPS and $15.14 million in revenues; next quarter estimates are -$0.07 EPS and $23.88 million in revenues.  Shares are around $8.37 in Friday afternoon trading and shares were trading at $8.06 about 90-days ago.

Thursday morning comes data-security leader Check Point Software Technologies Ltd. (NASDAQ: CHKP). Thomson Reuters has consensus estimates of $0.62 EPS and $276.71 million in revenues; next quarter estimates are $0.65 EPS and $293.17 million in revenues.  Shares are around $51.70 in Friday afternoon trading and shares were trading around $47.00 about 90-days ago.

Fairchild Semiconductor International Inc. (NYSE: FCS) reports Thursday morning. After the TI-NSM merger, investors will be paying closer attention than before. Thomson Reuters has consensus estimates of $0.36 EPS and $413.25 million in revenues; next quarter estimates are $0.39 EPS and $422.76 million in revenues.  Shares are around $19.00 in Friday afternoon trading and shares were trading at $16.00 about 90-days ago.

Hasbro Inc. (NASDAQ: HAS) is due Thursday morning and it is probably safe to assume that investors will of course bet watching Mattel Inc. (NASDAQ: MAT) on the news ahead of its earnings due Friday… Thomson Reuters has consensus estimates of $0.17 EPS and $661.69 million in revenues; next quarter estimates are $0.38 EPS and $842.07 million in revenues.  Shares are around $47.35 in Friday afternoon trading and shares were trading at $46.00 about 90-days ago.

SUPERVALU Inc. (NYSE: SVU) is no market mover, but it has been cut in half over the last year and remains a giant turnaround stock for many investors.  Thomson Reuters has consensus estimates of $0.34 EPS and $8.75 billion in revenues; next quarter estimates are $0.32 EPS and $11.35 billion in revenues.  Shares are around $9.33 in Friday afternoon trading and shares were trading at $8.91 about 90-days ago before challenging the $7.00 mark thereafter.

Cubist wins here even if it loses business from brand sales versus generic sales.  As a part of the deal, Teva can launch its generic version in the United States in June-2018 if Cubist wins a six month pediatric exclusivity.  If exclusivity is not granted, then Teva can launch in December-2017.  Here is where Cubist wins: Teva will buy the drug ingredients from Cubist and the terms call for a percentage of Teva’s net profit on these sales to go back to Cubist.  Teva also agreed to acknowledge the patents under the case as valid patents and that a prior generic launch would violate those patents.

If this is not a win-win for Cubist, then what is?  The move effectively settles a patent infringement case filed by Cubist in early 2009 against Teva after Teva filed with the FDA to sell a generic version of the drug.  Teva gets one more feather in its cap for the decade ahead.  Cubist safely secured its market today and it locked in revenues for Cubicin even after its patent exclusivity expires. 

Cubist is one we had noted as maturing but also as one of many possible buyout candidates in the biohealth space.  Shares still trade at an acceptable multiple compared to many biotechs and emerging pharmaceutical companies out there.  Thomson Reuters sees $0.74 EPS in 2011 and $1.45 EPS in 2012.  At $29.20 after a 16% gain this morning that comes to a blended forward multiple of roughly 26-times expected earnings.  That is not exactly cheap, but it is not at all in the ridiculous territory for a company of this caliber in the biohealth space. 

Cubist’s market cap is a mere $1.74 billion even after this 16% gain.  While Cubist has over $435 million in direct long-term debt, it also has more than $900 million in its cash, short-term investments and long-term investments.

JON C. OGG