Tuesday, October 30, 2007

Biotech Drug May Halt Brain Tumors

A small drug trial conducted by Duke University indicates that Avastin,now approved for the treatment of lung,breast and colon cancer,may lengthen the lives of some brain cancer patients.Avastin works by blocking the nutrients and oxygen which sustain malignant tumors.Eighty percent of the 35 patients in the trial experienced a doubling of expected survival to at least six months,while 50% of them had a halting of new tumor growth.In at least one case,complete remission occurred.Typically,patients with the type of cancer,glioblastoma,live only three months with conventional chemotherapy.The combination of Avastin with another drug,irinotecan,must be further evaluated in a larger trial to get approval.If it does,more insurance companies will cover the treatment.Avastin is produced by Genentech,a San Francisco Bay area biotech firm.The drug is extremely expensive,running into six figures for a full course of treatment.Genentech(DNA) sometimes provides free drugs or caps treatment costs.The company's stock has been battered by Wall Street analysts,who obsessively track the career of every medication.The slightest setback for one drug reinforces the stock's range-bound status.Ultimately,this can mean fewer dollars supporting the firm's critical research,as investors are scared away.Nonetheless,many analysts consider Genentech a good long-term investment.It has a long list of drugs and prospects in various stages of development and approval.Another company with a battered stock,Rite Aid Corporation(RAD),has been living up to its name.The Camp Hill,Pennsylvania pharmacy chain provided free sunscreen,lip balm and hand sanitizers to victims of the Southern California wildfires.It also donated 100,000 dollars to the American Red Cross for the victims.Along with other retailers,Rite Aid has heavily promoted a wide range of Halloween merchandise this year,while inserting a number of Christmas items in this week's circular as well.Rite Aid,which is led by CEO Mary Sammons,is dealing with its recent acquisition of Eckerd and Brooks drugstores.

Tuesday, October 23, 2007

A Cascade Of Caution

As the hills of Malibu burn,investors are facing their own persistent hazards-many of them so obscure that even the elite are puzzled.John Mack,CEO of Morgan Stanley(MS),says it will take 6-9 months to figure out what the losses are.We are not out of the woods yet.The credit market has improved,but mortgage securities will take a long time to work through.What is the collateral behind these packaged mortgages? That is the challenge.Treasury Secretary Hank Paulson calls for an aggressive response to the housing crisis.It is a significant threat to the U.S. economy,and is still unfolding.The longer housing prices are stagnant or fall,ther greater the penalty on our economy.Scott Sperling of Thomas H. Lee Partners,a private equity firm,says it is a very dangerous time for his business.It is a time for great caution.We haven't seen the last of the troubles.We have improved a little,notes Paul McCulley of Pimco,but the mortgage area is very restricted.There is a lot of downside on the economy.The equity market is a call option.Asset-backed commercial paper remains a problem,and structured investment vehicles still need to be unwound.To Carter Worth of Oppenheimer,it seems we will go back down to where we were before the Federal Reserve cut interest rates on 9-18.The market is wobbly and increasingly thin,so why rush to buy? Jeffrey Saut of Raymond James notes a big uptick in credit card debt.That suggests the peak of a credit cycle,and a slowdown to follow.To prepare,some investors are looking to the Vanguard Total Bond Fund(BND) for their protection.Others are buying shares of General Electric(GE),which is relatively cheap at this time,pays a dividend and has an international presence.

Tuesday, October 16, 2007

Ford Gets In Sync

Ford Motor Company(F) is expanding in Southeast Asia.It is building a plant in Thailand with its Mazda affiliate.The factory will produce 100,000 small cars a year.The 2008 Ford Focus,the automaker's smallest car,has received good marks for being predictable and steady on the road,with more comfortable front seats and a 3% more powerful engine than in previous versions.It is perhaps most remarkable for its debut of the Sync voice control system.Designed by Microsoft(MSFT),this voice-activated feature reads text messages to you from Blackberries and other devices while you are driving.The Sync system has received a Breakthrough Award from Popular Mechanics for setting benchmarks in design,creativity and engineering.Talks between Ford and the United Auto Workers union are in high gear,now that the UAW has reached agreements with General Motors and Chrysler.Because Ford carries a lot of debt and isn't as far along in its restructuring as GM and Chrysler,talks could be more difficult.As well,CEO Alan Mulally has a reputation for toughness,having endured a 28 day strike while he was working at Boeing(BA).Ford intends to sell its luxury brands in the next two months,and has hired away a marketing executive from Toyota Motors(TM).Having had a big loss in '06 and the worst sales decline among US automakers in '07,the old line company needs every leg up it can lift.Ford shares have been sparked by the UAW accords with the other automakers,while Microsoft shares have been bolstered by its global business and success with electronic games.Both stocks were trading up this morning.

Tuesday, October 9, 2007

Purchasing Managers Graph Slowing Economy

The Institute for Supply Management,a U.S. buyers' trade group,has released its Purchasing Managers Index for September.The manufacturing sector index fell to 52 in September from 52.9 in August,but had been expected to reach 52.5 at a minimum.This indicates continuing ecconomic growth,but at a slower pace than was previously believed.The ISM manufacturing index surveys more than 350 companies.In September,new orders fell to 53.4,down from 55.3 in August.The production index dropped to 54.6 from 56.1.The ISM service sector index for September depicts a similar scene,although it is more significant to the U.S. economy,which is predominantly service-oriented.The September reading was 54.8,down from 55.8 in August.New orders declined to 53.4 from 57.Inventories plummeted from 57 to 50,on account of the decline in orders.These are not recessionary numbers,but seem to support a gentle landing scenario at this late phase of the business cycle.The ISM manufacturing index was seconded by the factory orders report,which showed a drop of 3.3%,versus an expected fall of 2.4%.Investors are looking to multinationals such as IBM or exchange-traded funds such as the iShares Trust FTSE/Xinhua China 25 index(FXI) to get beyond the U.S. slowdown.


Patricia Russo's age was misstated as 54 in my last posting.She is 55 now.

Tuesday, October 2, 2007

Russo Faces Restless Board

When Patricia Russo left America for Paris to head Alcatel-Lucent(ALU),she knew it would be a challenge.Mergers and acquisitions,such as the combination of Alcatel and Lucent Technologies,are rarely if ever easy.Not only are there cultural issues,but financial pitfalls as well.Alcatel-Lucent is proving to be no exception to the rule;indeed,it is ailing to a frustrating degree.Its share price was over 15.00 in January.Today,it struggles to stay above 10.00.The board of ALU has demanded changes within a month,following the telecom colossus' third profit warning.They expect Ms. Russo to deliver a restructuring plan.There is no reason why this industry leader can't be turned around.It is number one in DSL,with a 39% market share;number one in optics,with a 23% market share in Terrestrial and Submarine;and number one in long-haul microwave transmission,among other areas.With a capital of more than 4.5 billion euros,ALU has the substance.It just needs to be shaped a little better.Ms. Russo,54,is a Georgetown University graduate.She served more than twenty years at AT and T(T) and Lucent Technologies,which she helped found.I wish her much success at this crucial moment in the life of her major firm.This morning,Alcatel-Lucent shares were trading up at 10.10.