Genentech (NYSE: DNA) closed at $78.19 Tuesday. Roche announced on July 21 the offer to buy the balance of 44% of DNA it does not own for $89 cash. DNA November option implied volatility of 60 is above its 26-week average of 33 according to Track Data, suggesting larger price movement.
IBM (NYSE: IBM) closed at $95.65 Tuesday. IBM is scheduled to report Q3 EPS on October 16. Thomas Weisel lowered its 12-month price target form $143 to $120. IBM October option implied volatility is at 85, November is at 60; above it's above its 26-week average of 30 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
U.S. stock futures drifted lower Thursday morning on the heel of another big loss reported by AIG. With reports today that mortgages made in 2007 are going bad at a rapid pace, the blow to the financial system may be even deeper than Wall Street had estimated, and data on June pending home sales could give more information about the recent state of the housing market. Also in focus today will be July same-store sales announced by retailers, which could show a 2.2% gain due to stimulus checks and back-to-school shopping, as well as rate decisions by ECB and BOE. The latter already kept rates the same. Finally, rising oil prices could affect trading as well.
AIG (NYSE: AIG) posted its third straight quarterly loss Wednesday after the close. Analyst believe that this quarter's $5.56 billion recorded loss due to investments related to mortgages could continue in the next few quarters. AIG's results didn't just cause investors to dump the stock, but also caused overall jitters about financials. AIG shares are down over 9% in premarket trading. In Europe, Allianz, Axa, Aegon, three of the biggest insurers, also post lower earnings on asset writedowns. Toyota Motor Corp. (NYSE: TM) reported a 28% profit fall in the quarter, 39% drop in operating profit. The company said the strong yen and rising costs of materials for the decline in addition to soft conditions in the U.S. all contributed to these results. While it said it plans to offset the declines by launching new vehicle models and stepping up production of popular models, it's unclear how successful that would be in light of softening economic conditions worldwide.
Staying with the auto industry, The Wall Street Journalreported that Chrysler and Nissan Motors (NASDAQ: NSANY) are in talks tabout jointly producing midsize cars, where Nissan would produce midsize sedans that Chrysler would sell in the U.S. under its own name.
Genentech (NYSE: DNA) is recently trading at $93, above its close on Friday of $81.82.
Roche Holding AG offered to buy the rest of DNA for $89 in cash. Roche, the world's largest maker of cancer drugs, acquired a majority in DNA in 1990 and currently owns 55.9% of DNA. Goldman Sachs says: "We expect the independent directors to negotiate with Roche for a higher price."
DNA August option implied volatility of 31 is near its 26-week average according to Track Data, suggesting non-directional price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
This morning's announcement that Roche wants to pay $43.7 billion for the 44.1% of Genentech (NASDAQ: DNA) it doesn't already own raises the question: "Why is Genentech worth so much to Roche?" The answer: it outperforms its competitors when it comes to innovation.
Roche is offering a 9% premium to Genentech's market value at Friday's close. Reuters reports that Roche wants Genentech's $2.6 billion (2008 estimated sales) Avastin, a colorectal cancer treatment, and Herceptin, a $1.3 billion (estimated 2008 sales) breast cancer drug, as well as Genentech's drug development portfolio.
Roche also expects to save $750 million to $850 million in pretax costs, but the long-term benefit would be for Genentech's innovative culture to take over the relatively dry drug development environment of Roche. If that doesn't happen, the deal could be unprofitable for both companies.
Roche, the Swiss drug maker, has offered to buy the 45% of biotech giant Genentech (NYSE: DNA) that it does not already own. The offer totals $43.7 billion in cash. According toReuters, Roche "would offer $89 per share to buy up the remaining stake, a 9 percent premium to the biotech company's closing share price on Friday."
The transaction would probably be a poor deal for Genentech holders and the board of the company should reject it and push for a higher price. When reporting quarterly earnings recently, the company raised its outlook to a range of $3.40 to $3.50 per share, from $3.35 to $3.40. Several brokerages made positive comments about Genentech and Citigroup began coverage of the stock as a "buy" with a $91 price target.
Although Genentech's shares are trading at a 52-week high at nearly $82, the firm is just recovering from rough earnings in last 2007. Early last year, before the rocky patch, the stock traded just below $90. The Genentech's No.1 drug, cancer treatment Avastin, is expected to do extremely well over the next several years.
The Roche offer does not take into account the fact that Wall St. expects Genentech to be a powerful growth company during the rest of the decade making the stock worth well over $90.
Douglas A. McIntyre is an editor at 247wallst.com.
With regulators, politicians and rating firms biting at their heels, Countrywide Financial Corporation (NYSE: CFC) believed that it had no choice but to approach Bank of America Corporation (NYSE: BAC) last month about a merger, reported the Wall Street Journal. That fear led to BAC's $4B takeover of Countrywide, the Wall Street Journal reported.
According to the Financial Times, European public health specialists have found "significant resistance" to Roche Holding Ltd's (OTC: RHHBY) widely purchased influenza antiviral medicine Tamiflu.
OTHER PAPERS:
Shares of Britain's third-largest drug maker, Shire Plc (NASDAQ: SHPGY) plummeted yesterday to a two-year low on concerns about demand for its attention deficit hyperactivity disorder treatment for children, Vyvanse, the Telegraph reported.
The Achilles heel of discount broker E*Trade Financial Corporation (NASDAQ: ETFC) may be its lesser known mortgage business, whose value is now at the center of debate regarded its sale price, reported the Wall Street Journal.
According to a report prepared for European medicines authority, the Financial Times reported that Roche Holding Ltd (OTC: RHHBY) is responsible for impurities that caused an international recall of its HIV drug.
The FT also reported that the United Kingdom's Virgin Group was confirmed as the preferred bidder for British bank Northern Rock, as the bank said it wanted to hold discussions with Virgin "on an accelerated basis."
OTHER PAPERS:
Sources close to the matter said that Ford Motor Company (NYSE: F) may put the brakes on overseas plans in many markets including India, South Africa and China on hold until it completes the sale of its Jaguar and Land Rover units, according to the Economic Times.
China is expected to unveil more than 20 regulations on foreign mergers and acquisitions, or M&A, according to a senior Chinese legislator, Xinhua reported.
MOST NOTEWORTHY: WellCare Health, Beacon Power, Tuesday Morning, West Pharmaceutical Services and Vectren were today's noteworthy upgrades:
Jefferies upgraded shares of WellCare Health (NYSE: WCG) to Buy from Hold, as they believe the investigation could most likely result in fines as opposed to the loss of contracts with the company's government customers.
Merriman raised its rating on Beacon Power (NASDAQ: BCON) to Buy from Neutral, as they believe the company is well-positioned for significant penetration of the growing frequency regulation markets.
Piper upgraded shares of Tuesday Morning (NASDAQ: TUES) to Outperform from Market Perform as they believe the company's sales and margins trends are stabilizing.
Citigroup upgraded shares of Vectren (NYSE: VVC) to Buy from Hold, as they believe 2008 will be an inflection point with the share issuance and rate relief aiding earnings.
OTHER UPGRADES:
Goldman added Roche (OTC: RHHBY) to its Conviction Buy List.
Zumiez (NASDAQ: ZUMZ) was upgraded to Buy from Hold at McAdams, Wright.
Thomas Weisel upgraded MasterCard (NYSE: MA) to Market Weight from Underweight.
MOST NOTEWORTHY: Apollo Group, Zoran, AmSurg Corp, Apple and Tribune Co were today's noteworthy upgrades:
Baird upgraded shares of Apollo Group (NASDAQ: APOL) to Outperform from Neutral based on positive enrollment and revenue trends, margin improvement, and a strategic international announcement.
CIBC upped its rating on Zoran Corporation (NASDAQ: ZRAN) to Sector Outperformer from Sector Performer following strong Q3 results and guidance.
Jefferies upgraded shares of AmSurg Corp (NASDAQ: AMSG) to Buy from Hold as they believe the new CEO is preparing to drive earnings growth through acquisitions.
ThinkEquity continues to expect Apple (NASDAQ: AAPL) to outpace the industry in growth. The firm upgraded shares to Buy from Accumulate.
Barrington upgraded shares of Tribune Company (NYSE: TRB) to Market Perform from Underperform on valuation, as they believe the current price significantly discounts the risks of the going private transaction getting done.
Negotiations continued last night on a new labor agreement between Chrysler and the UAW, but it is unclear if an agreement will be reached by today's 11am deadline, reported the Wall Street Journal (subscription required).
MGM Mirage (NYSE: MGM) is today expected to announce plans to build a $5B resort in Atlantic City, NJ that will be completed in 2012, reported the Wall Street Journal.
The CEO of Swiss pharmaceutical company Roche Holding (OTC: RHHBY), Franz Humer, said he has no intention of increasing his company's $75 per share bid for U.S. diagnostics company Ventana Medical Systems (NASDAQ: VMSI), and is "very confident" that the offer will succeed, reported the Financial Times (subscription required).
Harry Reid, the Senate Majority Leader, confirmed that there's little chance this year -- due to a crowded legislative calendar -- that there will be legislation to increase taxes on the private equity industry, reported TheDeal.com (subscription required).
MOST NOTEWORTHY: Motorola, Nokia, General Mills, AudioCodes and OceanFreight were today's noteworthy upgrades:
Cowen upgraded shares of Motorola Inc (NYSE: MOT) and Nokia Corporation (NYSE: NOK) to Outperform from Neutral. The firm expects Motorola to benefit as the mobile phone market in North America improves as market supply tightens in Q4 and results in better unit pricing, while Nokia's new phones put it in a position to realize higher unit sales.
Credit Suisse upgraded shares of General Mills Inc (NYSE: GIS) to Outperform from Neutral citing management's improved execution and openness, and well as valuation.
Cantor raised shares of AudioCodes (NASDAQ: AUDC) to Buy from Hold after channel checks suggested that Q3 business is tracking well.
OceanFreight Inc (NASDAQ: OCNF) was upgraded to Buy from Neutral at Oppenheimer on valuation and strong dry-bulk fundamentals.
OTHER UPGRADES:
Lehman upgraded shares of Roche Holding (OTC: RHHBY) to Overweight from Equal Weight.
Less than a month after the U.S. Food and Drug Administration granted "fast-track" status for the drug in order to speed up the application and review process, the Canadian drug maker said that CellCept, intended to treat a serious and rare form of lupus, failed to meet its primary endpoint in a late-stage trial. The Phase III clinical trial compared CellCept to intravenous cyclophosphamide, which is the current standard of care for lupus nephritis. 185 patients were tested with each, with the study showing that the response rates were similar in both.
Aspreva, which has a collaboration agreement with Roche Holding Ltd (OTC: RHHBY) for the drug, said that CellCept was not superior to the intravenous cyclophosphamide, its primary goal. The two companies announced they are currently in discussions to assess the drug's future potential, which is looking pretty grim right now.
Well, at least the company didn't put all of their drug-eggs in one lupus nephritis basket. Oh wait -- they did. Analysts believed CellCept would provide Aspreva with a steady revenue stream for the next three to four years, but without it, they believe this could create a selling opportunity.
The company, which develops drugs for patients that suffer from rare diseases that lack a multitude of treatments, saw shares drop 8% this morning.
Genentech (NYSE: DNA) is perhaps losing some of its old luster to a newer and fresher group of emerging biotechs. The American Society of Clinical Oncology, or "ASCO," is in the midst of its annual meeting in Chicago, the conference that historically has offered make or break news for many a cancer-focused biotech. In previous years, Genentech saw its stock get huge a boost from all of the possibilities of Avastin as an indicated treatment for multiple forms of cancer.
Unfortunately, the data coming out of these is not good enough to fuel share buying so far. Shares are indicated down 0.7% at $78.97 in pre-market trading (8:55 a.m.) Monday. While this may change later, Genetech's parent, Roche (LSE: ROG), saw its shares fall 1.9% in London.
Avastin has been a great drug for Genentech and for cancer patients alike, but seeing as that Genentech shares have been dead money for 18-months and with the company sporting an $83 billion market cap, investors are left holding the "what's next?" bag.
Shares of Onyx Pharmaceuticals Inc. (NASDAQ: ONXX) are up 6.7% in pre-market trading (9:23 a.m.) and Celgene Corp. (NASDAQ: CELG) shares are trading up over 1.5% on positive data at the ASCO conference.
Jon Ogg is a partner at 24/7 Wall St.; he does not own securities in the companies he covers.
MOST NOTEWORTHY: Starbucks Corp (SBUX), Southwest Airlines Co (LUV), Pacific Sunwear (PSUN) and Molson Coors Brewing Co (TAP) were just some of today's notable upgrades:
Goldman Sachs added Starbucks Corp (NASDAQ: SBUX) to its Conviction Buy List citing valuation and expectations for margin improvement.
Southwest Airlines Co (NYSE: LUV) was upgraded to Outperform from Neutral at Raymond James.
Roth Capital upgraded Pacific Sunwear (NASDAQ: PSUN) to Buy from Hold as they believe positive momentum is beginning to build.
Molson Coors Brewing (NYSE: TAP) was upgraded to Peer Perform from Underperform at Bear Stearns.
OTHER UPGRADES:
ThinkEquity upgraded WebEx Communications (NASDAQ: WEBX) to Source of Funds from Sell following the acquisition by Cisco Systems (NASDAQ: CSCO).
XL Capital Ltd (NYSE: XL) was upgraded to Strong Buy from Strong Sell as the firm believes an unusually low number of natural disasters is causing a sharply positive reversal in fundamental trends.
Soleil upgraded shares of Doral Financial Corp (NYSE: DRL) to Hold from Sell to reflect the recent sale of the company's New York branches and an improved outlook for the Puerto Rican economy.
Bear Stearns upgraded Roche Holding Ltd (OTC: RHHBY) to Outperform from Peer Perform and Anheuser-Busch Cos (NYSE: BUD) to Outperform from Peer Perform.
Countrywide Financial (NYSE: CFC) was upgraded to Market Perform from Underperform at Keefe Bruyette.
Genentech (NYSE: DNA) closed at $78.19 Tuesday. Roche announced on July 21 the offer to buy the balance of 44% of DNA it does not own for $89 cash. DNA November option implied volatility of 60 is above its 26-week average of 33 according to Track Data, suggesting larger price movement.
U.S. stock futures drifted lower Thursday morning on the heel of another big loss reported by AIG. With reports today that 
Genentech
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