History is repeating itself. After facing generic competition in the United States to its second-biggest product in 2006, Sanofi-Aventis is now dealing with a similar threat in Europe. Competition concerns came after Switzerland's Schweizerhall Holding AG announced it would launch a copy of the Plavix blood thinner that could be bought for a lower price. Schweizerhall said it expects German regulators to approve its generic version of Plavix, called clopidogrel.
Sanofi-Aventis's fears about generic competition are justified as the company had to fight against a similar situation less than a year ago. Back in 2006, Bristol-Myers Squibb Co. (NYSE: BMY), which develops the product with Sanofi, saw a big plunge in its sales after Canadian generics company Apotex Inc. launched a cut-price copy of the drug.
Once thought to be extremely safe, action rate securities have proved difficult to sell in this credit crisis. Tech companies are big holders of them and are taking charges left and right, including MetroPCS Communications Inc (NYSE: PCS), Palm Inc (NASDAQ: PALM) and Earthlink Inc (NASDAQ: ELNK), according to the Wall Street Journal.
NYSE Euronext Inc (NYSE: NYX) will look to increase its stakes in India's National Stock Exchange and the country's Multi Commodity Exchange, the Business Standard reported, once foreign ownership rules are eased. NYSE Euronext also intends to partner with the two Indian exchanges in order to help them develop their business.
WEB SITES:
Business Week reported that Brian Marckx of Zacks Investment Research said Bristol Myers Squibb Company (NYSE: BMY) may be an attractive takeover candidate for a larger pharma such as Pfizer Inc (NYSE: PFE) or France's Sanofi-Aventis SA (NYSE: SNY), both of which have been partners with Bristol on some of its products.
PDUFA date for Sanofi-Aventis SA's (NYSE: SNY) Taxotere for induction therapy of locally advanced head and neck cancer prior to chemoradiotherapy and surgery
MOST NOTEWORTHY: Sanofi-Aventis, Lifecell, Mylan Labs, Panera Bread and Norsk Hydro were today's noteworthy upgrades:
Societe Generale upgraded shares of Sanofi-Aventis (NYSE: SNY) to Buy from Hold as they believe pipeline maturation over the next 12 months can drive the stock higher.
Piper upgraded shares of Lifecell (NASDAQ: LIFC) to Outperform from Market Perform after their recent survey indicated that AlloDerm remains the leading biologic hernia mesh on the market and competition is making little headway.
JP Morgan upgraded Mylan Labs (NYSE: MYL), Panera Bread (NASDAQ: PNRA) and Norsk Hydro (NYSE: NHY) to Overweight from Neutral. The firm upgraded Mylan based on its position in the global generics market and above-average growth; Panera was upgraded on valuation, as they believe the recent operating risk is now behind the company; Norsk Hydro was upgraded, as they believe the value of the company's aluminum assets are higher than the current share price suggests.
OTHER UPGRADES:
HSBC upgraded Ride Aid (NYSE: RAD) to Neutral from Underweight.
Deutsche Bank believes new product leverage can bring upside to consensus operating margin expectations at Microsoft Corporation (NASDAQ: MSFT) and they view shares as attractively valued given its growth profile. The firm started shares with a Buy rating and $33 target.
Keybanc initiated shares of Salesforce.com (NYSE: CRM) with a Hold rating and sees slowing growth rates for revenue and net subscriber additions throughout the remainder of FY08 and beyond and thinks investor expectations are too high.
Keybanc also started shares of Taleo Corporation (NASDAQ: TLEO) with a Buy rating and $27 target, as it is well-positioned to gain market share in the Human Capital Management space.
Thomas Weisel believes McAfee Inc (NYSE: MFE) will benefit from PC market growth, enhanced awareness of the company's brand, and its renewed focus on product development for the midmarket corporate segment, and started shares with a Market Weight rating and $37 target.
OTHER INITIATIONS:
Lululemon Athletica (NASDAQ: LULU) was started at William Blair with an Outperform rating and at UBS with a Neutral rating and $37 target.
Merrill Lynch initiated shares of Zoltek Companies Inc (NASDAQ: ZOLT) with a Buy rating and $50 target.
A press release [PDF] out this morning confirmed positive Phase III results of Novo Nordisk's (NYSE: NVO) potential blockbuster drug, Liraglutide, which is an analogue of the naturally-occurring hormone GLP-1 in development by Novo for the treatment of type 2 diabetes. The clinical results of the first of five late-stage studies showed that Liraglutide provided significantly better glucose control and led to significantly more weight loss than patients who used Sanofi-Aventis SA's (NYSE: SNY) Lantus.
Novo CEO Lars Rebien Sorensen said the company is looking to apply for regulatory approval of the drug in the U.S. and Europe in the middle of next year, and hopes to receive approval by mid-2009.
This data is excellent news for Novo, who has been trying to gain market share against competitors for some time in the attractive U.S. diabetes market. Unfortunately, the data is also a negative for rivals Amylin Pharmaceuticals Inc (NASDAQ: AMLN), Eli Lilly and Company (NYSE: LLY) and Pfizer Inc (NYSE: PFE), who all have diabetes drugs on the market - Byetta and the inhalable insulin Exubera, respectively.
Shares of Novo were up nearly 4.5% this morning on the Liraglutide data, which some analysts called "a positive surprise."
Gilead Sciences Inc. (NASDAQ: GILD) opened at $81.24. So far today the stock has hit a low of $80.48 and a high of $82.17. As of 10:45, GILD is trading at 81.85, up 1.21 (1.5%).
The stock made a strong push in early spring to reach the low 80's and a one year high of 84.47 in May. The US Government has recently been ramping up efforts to fight against any future potential flu pandemic, including awarding multi-million dollar contracts to Sanofi-Aventis (NYSE: SNY) and MedImmune (NASDAQ: MEDI) to increase their capacity to produce flu vaccines. GILD, maker of Tamiflu, could stand to benefit from such efforts as well. Recent technical indicators for GILD have been bullish but deteriorating, while S&P gives the stock a 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $70 range. GILD hasn't been below $70 since January and has shown support around $78 recently. This trade could be risky if the FDA finds trouble with one of GILD's drugs, but even if that happens, this position could be protected by the support around $70 combined with its 200 day moving average, which is currently at $71 and rising.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls a position in GILD or MEDI. He does control a bullish hedged position in SNY.
Bristol Myers Squibb Co. (NYSE: BMY) opened at $29.21. So far today the stock has hit a low of $29.21 and a high of $29.96. As of 10:35, BMY is trading at $29.93, up $0.19 (0.6%).
The stock has been climbing gently over the past 10 months, reaching a one-year high of $30.55 earlier this month. Jim Cramer believes that this stock could really shoot up because struggling rival Sanofi-Aventis (NYSE: SNY) may be forced to buy BMY to make numbers. People are talking about a bid in the range of $33, but Cramer expects something closer to $40. Recent technical indicators for BMY have been bullish but deteriorating, while S&P gives the stock a 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $25 range. BMY hasn't been below $25 since December and has shown support around $28 recently. This trade could be risky if the FDA find trouble with one of BMY's drugs, but even if that happens, this position could find support around its 200 day moving average, which is currently at $27 and rising.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in BMY. He does control a bullish hedged position on SNY.
The highlight of the week, where all eyes will be focused (at least in the tech world), is the Apple Worldwide Developers Conference, which is all week long.
Monday June 11
Apple Inc (NASDAQ: AAPL) Worldwide Developers Conference to be held from June 11 through June 15.
The Financial Times (subscription required) reported that a confidential report on the Texas City refinery explosion found that John Manzoni, BP plc ADS's (NYSE: BP) CEO of refining, should have inspected the facility much deeper after "warning signals" from previous accidents.
The Financial Times also reported that both retailers and consumer goods manufacturers in developed countries are shifting their logistics operations, including sorting and labeling, to China.
OTHER PAPERS:
The U.K .Times has learned that a boardroom split has emerged between Jean-Francois Dehecq, the chairman of Sanofi-Aventis ADS (NYSE: SNY), and Gerard Le Fur, the CEO of Sanofi, over whether to acquire Bristol-Myers Squib Company (NYSE: BMY) for $54 billion.
According to the Independent, Wal-Mart Stores Inc (NYSE: WMT) is asking regulators whether it could make a bid to acquire J. Sainsbury (JSAIY), Britain's third largest supermarket.
The New York Times reported that stock bonuses paid to executives like CEO Gerard J. Arpey (his bonus includes shared valued yesterday at around $7.5M) have reportedly angered the Allied Pilots Association, the union representing AMR Corporation's (NYSE: AMR) American Airlines' pilots.
According to the Detroit Free Press, citing people familiar with the talks, General Motors (GM) is not actively pursuing a purchase of DaimlerChrysler AG's (NYSE: DCX) Chrysler Group after talking in January about a potential transaction.
WEBSITES:
GamesIndustry.biz reported that 20 million copies of Microsoft Corporation's (NASDAQ: MSFT) Windows Vista were sold in the month after the new operating system, or OS, was released worldwide on January 30, Microsoft reported. Vista is selling at more than twice the rate of Windows XP, Microsoft's previous OS.
MOST NOTEWORTHY: Sovereign Bancorp (SOV) and the Homebuilders sector topped the upgrade list today.
Citigroup upgraded Sovereign Bank Inc. (NYSE:SOV) to Hold from Sell with a $25 target, citing expectations for management to announce a larger cost-cutting program in January of 2007.
Bank of America upgraded the Homebuilders sector to Neutral from Cautious after their survey showed traffic improvements in 33 of 39 markets in November relative to October; They do not expect a smooth trend, instead, the firm expects to see choppiness in the market for the next 12-24 months.
In conjunction with the sector upgrade, Bank of America upgraded Standard Pacific (NYSE:SPF) to Buy from Neutral,
and Meritage Homes Corp. (NYSE:MTH), NVR Inc. (NYSE:NVR), Pulte Homes Inc. (NYSE:PHM), The Ryland Group Inc. (NYSE:RYL) and Toll Bros. Inc. (NYSE:TOL) to Neutral from Sell.
OTHER UPGRADES:
Sanofi-Aventis (NYSE:SNY) was upgraded to Overweight from Neutral at HSBC.
SAP AG (NYSE:SAP) was added to Merrill Lynch's Europe 1 list.
MOST NOTEWORTHY: Whole Foods (WFMI), Sanofi-Aventis (SNY) and Isis Pharmaceuticals (ISIS) top today's list of initiations.
Whole Foods Market, Inc. (NASDAQ:WFMI) was reinstated with an Outperform rating, raised from a Sector Perform rating, at RBC Capital Markets. The firm said expectations have been reduced and the risk/reward is favorable.
Sanofi-Aventis (NYSE:SNY) was initiated with a Buy rating and $50 target at Bank of America. The firm is positive on Sanofi's late-stage pipeline beyond Acomplia.
Isis Pharmaceuticals, Inc. (NASDAQ:ISIS) was started with a Buy and $14 target at A.G. Edwards. The firm said Isis is at an inflection point and that potential commercial opportunity for the T5000 Biosensor has been "overlooked and undervalued by investors."
OTHER INITIATIONS:
Citigroup assumed the coverage of Cardinal Health, Inc. (NYSE:CAH) with a Hold rating and $70 target.
Bear Stearns initiated Western Union Co. (NYSE:WU) with an Outperform rating and $27 target. Bear Stearns said they are positive on Western Union's powerful brand name and unique global network.
Shares of French drug maker Sanofi-Aventis (NYSE: SNY) have been tumbling more than 5% in morning trading on news that a Swiss drug maker said it expects to receive approval to sell a generic version of Sanofi's anti-clotting agent Plavix..gif){kind=logo}
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