Follow the Leader
When Pfizerannounced its deeper cost cuts last week, including a total of about 10,000 layoffs, analysts said other big drug companies that had not already started restructuring would use the industry giant as the model. Sure enough, today AstraZenecasaid it will get rid of 3,000 employees (5% of its workforce) over the next few years. It's the same old song: increased competition from generic drugs. AstraZeneca recently did a billion-dollar-plus partnership deal with Bristol-Myers Squibb on developmental diabetes drugs, and so it's one of the companies that is getting mentioned as a possible buyer of Bristol-Myers Squibb . The Financial Times reported yesterday that Bristol has hired investment banks to possibly get a bidding war going, on the heels of the French report earlier this week that Sanofi-Aventis was moving in for the kill. Bristol shares are up about nine bucks since last August, and rallied this week on the rumors and speculation.
And speaking of rallies, Gilead Sciences is at an all-time high today on very heavy volume. The biotech beat the Street on earnings after the closing bell yesterday, and gave much stronger-than-expected guidance. Many analysts are raising their ratings and/or their price targets on the stock.
While the company's HIV franchise was a solid performer, it also saw upside from a royalty that more than doubled on sales of Tamiflu. Gilead invented the drug and then partnered with Roche on it. Corporations, government and health agencies are stockpiling Tamiflu for a possible pandemic. We recently interviewed the inventor of Tamiflu, Gilead's head of R&D, Norbert Bischofberger; and this morning on "Squawk Box," we aired the story about how Tamiflu went from rags to riches. Consider the source and the fact that Gilead gets up to a 22% royalty on sales of Tamiflu, but Bischofberger says he has a Tamiflu stash at his home of about 2,000 capsules, that "most" Gilead employees have Tamiflu at home -- he says the company did not provide it -- and that everyone should have enough in their medicine chest to take care of themselves and their loved ones. (The drug has a 5-year expiration date on it.) Roche reports earnings next Wednesday, but in the first nine months of last year ,the company sold $1.3 billion worth of Tamiflu, putting it on pace for another record year of revenue.
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