Stock futures were mixed Thursday morning, indicating a similar start to U.S. stocks. While the S&P 500 showed weakness ahead of housing data to be released at 10:00 a.m. EDT, the Nasdaq composite was slightly positive after Amazon.com reported strong earnings Wednesday. Investors also braced for Ford's earnings, which indeed posted double the estimated loss. The earnings wave continues. Meanwhile, oil prices edged a little higher, but remained around $124 a barrel.
Starting with Ford (NYSE: F) then, the world's third largest automaker posted (after items) a loss of $1.38 billion, or 62 cents. Analysts surveyed by Bloomberg expected Ford to report a loss of 28 cents a share. The headlines scream of a loss of $8.7 billion though, which includes $8 billion in pretax writedowns of North American plants and assets of Ford Motor Credit Co. Ford also said it will convert three truck factories to produce small cars as rising gasoline prices sap U.S. truck sales. Dow Chemical (NYSE: DOW) couldn't manage to offset higher costs of energy and raw materials with the recent price increases it announced, and posted a 27% decrease in profit for the period. Net income was $762 million, or 81 cents a share. Revenue is up 23% to $16.38 billion. Earnings were below analyst expectation according to Thomson Financial of 85 cents per share, but better than the sales estimates of $14.9 billion. DOW shares are dropping some 9.5% in premarket trading as the company said it expects the economy to weaken.
Amazon.com Inc. (NASDAQ: AMZN) posted strong earnings Wednesday after the close, proving its growth days aren't over in this weakened economy hurt by high gas prices. Not only did it beat estimates -- with a 41% climb in revenue to $4.06 billion compared to $3.96 expected, and EPS of 37 cents compared to expectations of 26 cents -- but it also raised its full-year revenue projections. AMZN shares are climbing about 6.5% in premarket trading.
"You can invest for all the right reasons and still get the wrong result," notes long-standing turnaround stock expert George Putnam, referring to the poor performance of the pharmaceutical sector in recent years.
Here, in his industry-leading The Turnaround Letter, he offers a fascinating review of 10 leading drug stocks which he now believes offer a combination of growth potential at "pretty cheap" valuations. Here is his overview.
"In 2000 and 2001, when the Internet boom was becoming a bust, many smart investors turned away from technology stocks and put their money into drug stocks. How could you go wrong with the big pharmaceutical companies?
"Demand for their products was growing as the population aged. These companies had huge research and development programs that seemed to keep cranking out new blockbuster drugs. And most of them had great balance sheets, with many paying handsome dividends.
"Much of this reasoning has been borne out in the intervening years. Many large drug manufacturers have rung up substantial revenue gains over the last decade. So what's happened to the big drug stocks? With few exceptions they have gone sideways or down – in some cases down a lot.
Almost everyone these days has encountered cancer in one way or another. While the rate of cancer incidence has stabilized to declined since the early 1990s and, with newer and better treatments as well as early detection, cancer death rates have also declined, the war on cancer is still far from won.
It is no surprise, then, that a few days ago, IMS Health (NYSE: RX) -- a provider of market intelligence to the pharmaceutical and healthcare industries -- said that cancer drugs sales will nearly double by the year 2012. Assuming a compound growth rate of 12-15% a year, sales will grow from $48 billion in 2008 to $80 billion by 2012.
The main contributors to growth, according to the study, are an increasing number of patients on chemotherapy, not just in major markets but in emerging markets, too, as well as longer treatment periods for growing numbers of patients. Also fueling growth are the increased use of targeted therapeutic agents, along with first-time innovations coming to the market. Expensive new biotechnology drugs, and the increasing use of combination therapies that contribute to the exploding cost of treatment will also fuel cancer drugs sales growth.
The overall pharmaceutical market grew at a 6.4% pace in 2007, meaning that with its double-digit growth rate, the cancer drug market -- today contributing 17% to global pharmaceutical sales -- will only represent a greater proportion and emphasis. Of course, there will be factors moderating growth, such as drugs losing exclusivity and financial constraints of payers.
Cancer-fighting drugs can reach the market twice as fast as the average medicine, and companies can charge as much as $50,000 for a single course of treatment. It is no surprise then that with more and more drugs coming off patent many pharma companies are turning their attention to cancer. But can it save them?
Net income more than doubled to $1.06 billion, or 97 cents a share, as sales of Cialis and Cymbalta climbed. Revenue rose 14% to $4.81 billion from $4.23 billion. Excluding one-time items profit was 92 cents, below the 96-average estimate of analysts surveyed by Thomson Financial. Revenue was expected at $4.83 billion. Thanks to a lower tax rate, company raised its 2008 forecast to $3.90 to $4.05, from $3.73 to $3.90.
"Following strong performance in 2007, Lilly continued to deliver solid financial results in the first quarter of 2008," commented John Lechleiter, the company's new chief executive officer, said in the earnings release. "Double-digit sales growth was once again primarily driven by volume. ...We also made appropriate investments in R&D to accelerate the progress of our mid-stage pipeline, resulting in six molecules advancing to the next stage on clinical development this past quarter, while at the same time delivering strong earnings per share growth for the quarter."
The earnings miss was due to a larger-than-expected charge for halting development of the AIR insulin inhaler. The $145.7 million, or 9 cents a share, was at least $25.7 million more than the Indianapolis-based company estimated when it abandoned the drug last month, according to Bloomberg.
Miller Tabak analyst Les Funleyder told the news service that "In the near term, our earnings picture isn't that bad for Lilly, but they have a Zyprexa problem. It is going off patent soon and Risperdal is going off patent in the second half of this year.''
Shares of Lilly fell $2.29, or 4.4%, to $49.78 in early trading.
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When the New York Times recently broke a story that Eli Lilly & Co. (NYSE: LLY) was in confidential settlement talks with the federal government, the drugmaker was furious over the leak believing government officials were behind it. The company was probably enraged when it learned that one of its own lawyers accidentally sent a memo to a Times reporter about the settlement talks over whether it had improperly marketed Zyprexa.
"One of its outside lawyers at Philadelphia-based Pepper Hamilton had mistakenly emailed confidential information on the talks to Times reporter Alex Berenson instead of Bradford Berenson, her co-counsel at Sidley Austin," according to Portfolio.com. "With the negotiations over alleged marketing improprieties reaching a mind-boggling sum of $1 billion, Eli Lilly had every reason to want to keep the talks under wraps. It was paying the two fancy law firms a small fortune to negotiate deftly and quietly."
Pepper Hamilton was no doubt mortified but the Indianapolis-based drugmaker told the magazine that it would continue to retain the firm. Odds are good that there will be an adjustment or two to Lilly's hefty legal bill.
This goes to show you that even the most sophisticated technology can't save people from their own thoughtless mistakes.
Eli Lilly & Co. (NYSE: LLY) shares are rising this morning after the company reported a fourth-quarter profit of $854.4 million, or 78 cents per share. Adjusted earnings came out to 90 cents per share on revenue of $5.19 billion, beating analyst estimates of of 89 cents per share on revenue of $4.81 billion. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on LLY.
After hitting a one-year high of $61.00 in April, the stock hit a one-year low of $49.09 in November. LLY opened this morning at $52.92. So far today the stock has hit a low of $52.02 and a high of $52.92. As of 12:00, LLY is trading at $52.45, up $1.05 (2.0%). The chart for LLY looks bullish but deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $45 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just three months as long as LLY is above $45 at April expiration. Lilly would have to fall by more than 14% before we would start to lose money.
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Forest Laboratories (NYSE: FRX) develops branded and generic drug products, as well as non-prescription pharmaceuticals. Offerings include Lexapro, for the treatment of depression, Namenda for Alzheimer's disease, Benicar for hypertension, and Campral for the maintenance of alcohol abstinence. Other products include treatments for diaper rash, colic, cystic fibrosis, hypertension, eczema and psoriasis. The company is working in collaboration with other firms to develop treatments for asthma, schizophrenia, chronic pain and anxiety. Eli Lilly (NYSE: LLY) and Pfizer (NYSE: PFE) are major competitors.
Forest Labs pleased investors last week when it reported Q3 EPS of 96 cents and revenues of $998.2 million. Analysts had been looking for 75 cents and $946.6 million. Management also guided FY08 EPS to $3.35-$3.45, above prior guidance of $3.10-$3.20 and Street consensus of $3.06. The CEO noted that the company expects to report clinical trial results for several late-stage products during the remainder of the calendar year. Lehman Brothers, Roth Capital and AmTech Research subsequently reiterated "buy" ratings on the stock. Raymond James initiated the shares with a "strong buy." The shares popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers now recommend the issue with eleven "strong buys," ten "buys," twelve "holds" and one "sell." The stock's Price Book ratio (3.90), EPS Growth rate (23.35%), Operating Margin (22.46%) and Net Profit Margin (14.94%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $34.89 and $57.97. A stop-loss of $33.95 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.
There is an unbelievable story in The New York Times today about the pharmaceutical industry. It appears that the companies marketing drugs like Prozac and Paxil have been lax in reporting results of studies of their anti-depressant drugs.
NYTimes.com is reporting that one-third of all studies conducted by firms such as Eli Lilly (NYSE: LLY), Pfizer (NYSE: PFE) and Wyeth (NYSE: WYE) go unpublished.
Citing a new report in the New England Journal of Medicine, the article reports that "about 60 percent of people taking the drugs report significant relief from depression, compared with roughly 40 percent of those on placebo pills. But when the less positive, unpublished trials are included, the advantage shrinks: the drugs outperform placebos, but by a modest margin."
There is a great quote about the impact of this new study written by Dr. Jeffrey M. Drazen, the editor in chief of the New England Journal of Medicine:
This is a very important study for two reasons. One is that when you prescribe drugs, you want to make sure you're working with best data possible; you wouldn't buy a stock if you only knew a third of the truth about it.
Considering that Pfizer is now making $1.7 billion off a drug treating a condition that the medical field is not in agreement as to whether it exists or not, buyers beware of nebulous information.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund. Author does not own stocks mentioned above.
The Wall Street Journal reported that Apple (NASDAQ: AAPL) is not resting and keeps planning forward. After the recent launch of the iPhone in Europe, it is Japan's turn, and reportedly, Apple has held talks with NTT DoCoMo. Jobs, according to "people familiar with the matter," recently met with NTT DoCoMo's president, Masao Nakamura, to discuss a deal to offer its iPhone in Japan. Engadget notes, however, that NTT DoCoMo does not run a GSM/EDGE network and maybe consumers there will have to wait for the 3G version of the phone.
After announcing a dividend increase Monday, drug maker Eli Lilly and Co. (NYSE: LLY) said Tuesday CEO Sidney Taurel will retire on March 31 and step down as chairman of the board at the end of 2008. President and Chief Operating Officer John C. Lechleiter will take over as CEO on April 1.
Hong Kong Disneyland, held by Walt Disney (NYSE: DIS) and the Hong Kong government, which holds a majority stake, failed to meet its visitor attendance target for the second year running, a park official said Tuesday, revealing that numbers tumbled to over 4 million in its second year of operation from 5.2 million a year earlier.
Bristol-Myers Squibb (NYSE: BMY)'s blood thinner Plavix is the second-largest selling drug in the world. It brought in over $3.4 billion in sales during the first nine months of this year. Eli Lilly (NYSE: LLY), however, believes it has a better treatment [subscription required]. According to The Wall Street Journal, its "new drug, known as prasugrel, is intended to treat patients on the verge of a heart attack." The new treatment can stop the build-up of platelets in the blood within thirty minutes
Lilly has a number of drugs going "off patent" in the next seven years. If these are not replaced, 50% of the company's revenue is at risk. It is not clear how long it will take the FDA to approve the drug, if it ever will.
The Journal writes that "in the head-to-head study, 9.9% of patients on prasugrel suffered either a heart attack, stroke or death from a cardiovascular cause, compared with 12.1% of those given Plavix. That is a 19% reduction in risk favoring prasugrel."
With new drugs, though, there is always a catch. Prasugrel is 32% more likely than Plavix to cause major bleeding.
Now the politics of drug approval will kick in. Experts for Bristol-Myers will say the new treatment is too dangerous and that Plavix is as close to perfect as a blood thinner can be. Lilly will claim that it can adjust the dose to cut down on bleeding and will get a legion of doctors to attest to that.
In the end, the patient can bleed to death or have a heart attack. Does it matter how he died?
Douglas A. McIntyre is an editor at 247wallst.com.
U.S. film and television writers went on strike today, after last-minute talks failed to prevent the Writers Guild of America's first walkout in almost two decades. Several media companies holding film and television studios could be affected including Walt Disney (NYSE: DIS), Viacom (NYSE: VIA), News Corp (NYSE: NWS), CBS (NYSE: CBS), Time Warner (NYSE: TWX), General Electric (NYSE: GE) and others.
A key study found that Eli Lilly and Co's (NYSE: LLY) experimental anti-clotting drug boosts the risk of serious bleeding compared to the standard therapy. This caused Wall Street analysts to question the outlook for the product on Sunday with HSBC downgrading the stock from Neutral to Underweight. Still, Lilly's shares are up over 1.25% in premarket.
Stock futures were mixed Thursday morning, indicating a similar start to U.S. stocks. While the S&P 500 showed weakness ahead of housing data to be released at 10:00 a.m. EDT, the Nasdaq composite was slightly positive after Amazon.com reported strong earnings Wednesday. Investors also braced for Ford's earnings, which indeed posted double the estimated loss. The earnings wave continues. Meanwhile, oil prices edged a little higher, but remained around $124 a barrel..gif){kind=logo}
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With the Fed Funds rate at 2%, why are mortgage rates so high?
Cramer on BloggingStocks: Banks fail to raise money when they could 
Check your bank's safety rating
