If you think that the government, private payors and European social care are going to cough up $200k - $300k per year, every year, for each patient, you are going to be severely disappointed. If and when the CF compound get approved 2-3 years down the road, the reimbursement landscape will dictate uptake. Unlike other compounds to treat cancer, the Vertex compounds are for treatment of a chronic condition. The healthcare reform will not have the appetite to spend $1 million every 5 years for a patient on treatment. Private payors will seek annual reimbursement that is 1/20 of this model and premiums will reflect that. So most people will be forced into a federal program. Let's say that the lifespan of a CF patient is extended beyond 35 years with the drug. Since CF newborn screening is now mandated, that means for the first 12-15 years post approval(assuming patent protection length), each CF patient will cost $4-$4.5 million to treat at $300k/year????? And that is just for their initial 15 years of treatment while the drug is patent protected!! No way!!!! For how much improvement??
With regards to Smith's sales, he has never taken anywhere near this much off the table in the past. This is a telling call by him.
Cramer likes it still on CNBC tonight. That is a pure sign that it is time to sell. Being in the biotech industry, I continually get a kick out of his mispronunciation of some companies and his surface analytics. Really, how could you not know how to pronounce the name of a company if you are talking to management and other industry experts? He talks a good game in biotech but doesn't understand the science or the market. Pure hype. Why would the CFO sell so much if this was going higher. Do you think Cramer knows more than CFO?
First off, it is good to see that there is hope fore some of the CF sufferers. My only concern in the euphoria of the stock move revolves around the payor/provider equation. Given the goals to drive costs out of the healthcare system, I unfortunately do not see the government willing to pay the prices for administration of a drug that marginally improves a chronic condition. This in turn will influence the provider's behavior in prescribing the drug. With many of the onco-compounds, there are hopes of remission instead of continuous treatment. Therefore, I believe the financial models provided are overly optimistic. This may not be the news that CF sufferers want to hear, but this is the stark reality that many will face under the new healthcare reform environment. Call it rationing or denial of healthcare, but it is coming with the reform
I doubt DB is coming over for a quick sale. More than likely Big Tom convinced him to move closer to DB's Arizona homestead for a chance to be the big cheese. It was either that or PB got under his skin at LMNX.
Either way, QDEL isn't getting another top manager. Instead it is getting a true leader, with experience in all areas of diagnostics. The only surprise with DB is that he never got the call up from MW for the big show. Still puzzled by that one.
Best of luck
Both Johnny Knoxville and the Big Guy are excellent additions. Like I said, the Big Guy knows how to execute and should be excellent for the growth of the reagent development side of the business which quite frankly needs some help.
Between Balthrop, the Big Guy and the Ex-Spur---there sure are some tall guys around LMNX
The spinoff does not make ABT a takeover target;not while there is still a Poison Pill in effect.
I like the spinoff. I believe that this is setting ABT up for a sweet five year stretch. With regards to Ross--I don't think ABT would have just acquired Zone Perfect nutritionals, only to turn around and spin it off. Diagnostics is also poised to begin its growth in the US with high margin Molecular and new product Intros, Europe is going gangbusters with new products already released. PPD is also entering in a sweet spot with introduction of no less than 3 new blockbuster Meds starting with Humira which will see Skislope sales in the next two years.
Staying Long at these levels.
Wallstreet analysts at work again. SC Cowen downgrades Abbott because of lowered Humira projections and impact of US Diagnostics.
1. Humira is approved early and will contribute more--not less to bottom line for '03
2. US Diagnostics Franchise contributes less than 5 % to the bottom line---so even if it gets cut in half top line, it will have vitually no impact on the bottom line.
And we are now going to have independent research. Boy, I can't wait. The least talented on Wallstreet; that is the less talented people who can't find the better Street jobs will be doing research for you and me. Aren't we lucky?!Although it's hard to do a poorer job than SC Cowen!
Remember that the US Diagnostics arm of the Abbott Corporation contributes roughly 6% of total revenues top line. However the % contribution to the bottom line is less than 6%. This is precisely why Miles moved the company toward Pharma. The impact that the SG Cowen indicated on Diagnostics to the company bottom line is vastly overated.The Cowen downgrade credits far to much contribution to the bottom line from the US Diagnostics franchise than is reality. Pharma will be in favor for the next couple of years and a 23-25 PE ratio on future 12 month earnings is not unreasonable. Therefore with Abbott expected to earn between $2.22 and $2.27, a price target of $54 is conservative.
The local Chicago money guys in the know have a daily 1/2 hour radio program on the Score-AM 670. One of the longtime Chicago traders with fairly good connections is nicknamed Doc J. When asked about the prospects for Divine this morning he basically was anything but optimistic even joking about the sign coming down from the front of the building.
My impression from listening to Doc J and seeing him for years on local TV is that he and his friends are fairly aggressive traders and money managers.I got to think they have fairly good contacts in and around Chicago to give them this doubtful perception on Divin'e future .
I hate to say I told you so. I guess the analysts started asking themselves the same fundamental valuation questions that I asked this board last night. In addition to the facts that I presented, ask yourself these 2 questions.
1. Is it reasonable to expect the entire valuation of ABT to go down 11.5% when the US. Diagnostics franchise is only 6.5% of revenues?
2. Is the existing $1 + Billion of US. Diagnostics franchise sales going to be halted?(remember the Consent Decree was for products already off the market---and the feds are already catching heat for their botched role in the meltdown of Anderson and all of the innocent employees that lost their jobs due to the ill advised indictment)
If you answer no to these questions then the action is obvious---BUY THIS STOCK!!!!
Nice to buy at a discount-
1. Stock has dropped 11.5% in last 2 days.
2. The entire diagnostics franchise does a litttle over $3 Billion a year across the globe.
3. The US portion is approximately 35 % of the global sales-- approximately $1.2 Billion.
4. Total Company sales(all market segments plus Knoll) was over $16 Billion last year.
5. The press release indicates that the FDA Consent Decree related products comprise annual sales of $250 million which have been out of the sales numbers for almost 3 years.
So -- Even if the entire US portion of Abbott's Diagnostic franchise had zero sales(using an extreme example), the company would only be giving up 6.5% of its total company revenues. Yet the stock has tanked almost double this amount.
Now--- since the US Diagnostic franchise is only looking at the continuation of a $250 million in an annualized sales run rate(already out of the current sales run rate) and the bulk of its remaining US sales will continue to be in tact( $1+Billion)--- Do yourself a favor and buy this stock. The numbers are in your favor!!!
It is clear that there is accumulation of this stock by the fund managers. Look at price and volume charts which show a dramatic spike in the volume starting on October 31, 2001, which coincidently is the last day of the year for most funds. As soon as November started, the volume spiked and has never slowed. You better believe that 68 new institutional buyers and only 2 sellers is indeed a sign of support. Buy low sell high, isn't that how it goes.
I was encouraged by the Conference Call:
"I don't see any need to raise cash in the foreseeable future." -- That from Nick. Also Van talked about the fact that by the end of this quarter , WSTL will have used up all of that high priced inventory. I think he said something like, "this is high priced inventory from the Spring of calendar year 2000 , if you can believe that." Thanks Mark Zionts! Going forward it would be logical to expect margins on the Networking gear to go up due to the lower cost of inventory and the shift to a more profitable product mix. Van also intimated that the company lost its way a couple of years ago when it neglected certain niche parts of its Teltrend business(mountings,protection etc.). Also the Fujitsu relationship sounds like it is near its end with the potential to look at alternative channels in Europe. I don't believe WSTL is happy with Fujitsu's handling of the transport business.The company was only about $1 million cash flow positive for the quarter since they chose to pay down a little more debt. I actually expect to see CPI flat based on Rick's comments. Additionally, Van said that January (post-holiday) was a slow month for Networking gear but that the company had assurances that February would bring a ramp up from their customers. I would not be surprised to see Networking gear actually be slightly down for Q4.The wildcard seems to be the Teletrend business--which Van said is shrinking at rate of 15% per year(thus the big write off for the Q3). He still expects that this business will pick up this year, but he does not know when.
The other huge Wildcard that he mentioned is the FCC and the Bush administration with regards to the pending decision on broadband. If the RBOCs get the same treatment that the cable companies currently enjoy (high speed internet being exempt from the long distance anti-competitive regulations)then there could be a boom for the DSL industry.