The Zacks Analyst Blog Highlights: Herbalife, Nu Skin, Avon Products, Bayer and Amgen


For Immediate Release
Chicago, IL – March 13, 2014 – announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Herbalife Ltd (HLF-Free Report), Nu Skin Enterprises Inc (NUS-Free Report), Avon Products Inc (AVP-Free Report), Bayer (BAYRY-Free Report) and Amgen Inc. (AMGN-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Wednesday’s Analyst Blog:

Herbalife Faces Another Ackman Attack

Herbalife Ltd (HLF-Free Report) finds itself facing yet another accusation by activist investor Bill Ackman, hedge fund manager of Pershing Square, for operating illegally in China, as per media reports. Shares of this nutritionist company fell 1.16% yesterday after the news.

The billionaire investor told his clients that Herbalife is likely violating multi-level market restrictions in China. Ackman pointed to internal documents obtained from a former employee at Herbalife and argued that the company’s Chinese operations were identical to its business in other countries such as the United States and Mexico. However, this can be risky for Herbalife as Chinese law prohibits any multilevel marketing structure.

Herbalife responded to Ackman and stated that its business model is in compliance with Chinese direct-selling and anti-pyramid regulations. Earlier in Jan 2014, First Financial Daily, a Chinese newspaper, also suspected that Herbalife adopted illegal marketing practices in China. Later in Jan 2014, the Canadian Competition Bureau announced a formal investigation into the pyramid scheme business model complaints against the company, as per a report by the New York Post.

Over the past 14 months, Ackman has been accusing Herbalife of running a pyramid scheme business model. i.e. it employs deceptive marketing practices for improving business. The company was accused of making money by recruiting new sales people and not from its sales.
Ackman made that claim in Dec 2012 when he unveiled a $1 billion short position in the company's shares. Ackman even sent a letter to its investors on Dec 24, 2013 about the improper recruiting methods adopted by Herbalife.

Reportedly, Ackman tried to lobby Congress members to push for an investigation against Herbalife by state and federal regulators, especially the Federal Trade Commission. Such an attempt shows that Ackman is determined to prove the charges. Herbalife, on the other hand, has been denying all the charges and is confident about its operations.

Herbalife is not the only company, which employs sales representatives to sell its products. Other multi-level marketing companies like Nu Skin Enterprises Inc (NUS-Free Report) and Avon Products Inc (AVP-Free Report) also follow the same distribution model.

We appreciate the fact that despite allegations numerous attacks on its multi-level marketing model, the company’s earnings continue to increase. This signals that the stock has potential and will continue to move higher, going ahead.

 Herbalife holds a Zacks Rank #2 (Buy).

Bayer/Amgen’s Nexavar Fails Late-Stage Study

The HealthCare segment at Bayer (BAYRY-Free Report) and partner, Amgen Inc. (AMGN-Free Report), announced disappointing results from a phase III STORM (Sorafenib as Adjuvant Treatment in the Prevention of Recurrence of Hepatocellular Carcinoma) study on Nexavar.

The study was evaluating the clinical benefit of Nexavar compared to placebo as an adjuvant treatment for patients suffering from hepatocellular carcinoma who had no detectable disease following surgical resection or local ablation.

Bayer stated that Nexavar failed to meet the primary objective of the study of improving recurrence-free survival. However, the companies mentioned that the safety findings were consistent with Nexavar’s known profile.

We are disappointed with the study outcome. Bayer’s shares went down slightly following the news. Bayer is, however, not losing hope and stated in its press release that it will continue to explore the full potential of Nexavar in all stages of liver cancer. As per company sources over 780,000 liver cancer patients are diagnosed each year worldwide.

Nexavar is already a key oncology product at Bayer and is approved in over 100 countries around the globe. In the U.S., the drug is approved for the treatment of patients suffering from locally recurrent or metastatic, progressive, differentiated thyroid cancer (:DTC) that is refractory to radioactive iodine treatment.

In the EU, the drug is approved for two other indications – for the treatment of patients suffering from hepatocellular carcinoma and suffering from advanced renal cell carcinoma who have had unsuccessful interferon-alpha or interleukin-2 based therapy.

Bayer reported Nexavar sales of €771 million in 2013, up 3.3% year over year on an adjusted basis. Bayer and Amgen are evaluating Nexavar in several other indications as well. We expect Nexavar sales to be boosted with further label expansions.

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