Wednesday, February 21, 2007

Paperstand (GOOG, MYL, GSK, ID)

According to the WSJ, 4 months after snatching YouTube, Google (GOOG) has encountered a bigger challenge: finding allies in the TV industry. With TV execs up in arms about the unauthorized posting of TV shows on the video site, Google is searching for a way to dial down the tension. It sees that task as vital to YouTube's profit potential. Until about a month ago, Google thought it might get a big boost from CBS. The 2 co’s were closing in on a multiyear deal to let YouTube users watch clips from CBS shows. The co’s also discussed ways to peddle CBS Radio ad spots to Google advertisers. Under the deal, Google would have guaranteed ad rev of more than $500M for CBS. But Google's relations with the big TV co’s have grown frosty of late. Google was working on a deal last year with Viacom. Now, Viacom has accused Google of copyright infringement and has demanded that YouTube remove some 100K clips of Viacom programs. Now, the hoped-for deal with CBS has unraveled as well. The co’s couldn't agree on such important issues as how long the deal would run. "The way to resolve this is not by suing ppl quickly but working together to create legitimate business models that respect copyrights," says Paul Cappuccio, Time Warner's general counsel. "Yet we will sue those who are irresponsible."

“Heard on the Street” column discusses Mylan (MYL), which has won several court cases that have given the co exclusive rights to sell generic copies of some blockbuster drugs. The co reported record 4Q earnings a couple of weeks ago, with net income nearly tripling. But there could still be room to run for Mylan and its investors. Next up for the co is a decision in the biggest court battle it has yet waged. Mylan may learn any day now whether it has won its challenge to Pfizer’s key US patent for Norvasc. Even among the battles common among big drug co’s and generics makers, the fight over Norvasc is high-stakes. If Mylan prevails, it could prove the most lucrative victory in the co's history. The prize: 6 months of exclusive sales of generic Norvasc. Given the unpredictability of patent disputes, analysts aren't counting a Mylan victory into their projections. But some analysts think if Mylan brings generic Norvasc to mkt exclusively, the coup could boost earnings this year by 50c a share. The co currently trades at 15.5x estd earnings for ‘07, moderately cheaper than its peers. Greg Estes, of Intrepid Capital Mgmt, which owns 230K Mylan shares, increased his position in Mylan after the co abandoned its bid for King. He has become more confident in Mylan as it has concentrated on its core generics business. "What they're really good at is being first to file" successful patent challenges, Mr. Estes says. He says Mylan is 20% undervalued, and that he is hanging on for gains. "I have no plans on selling."

Barron’s Online out saying that the Street isn't giving GlaxoSmithKline (GSK) enough credit. And no wonder. Sales of key drugs fell short last year. In Oct, the co junked 2 late-stage experimental drugs. And patents protecting several blockbuster medications have or will expire this year. In ‘07, profits could increase far slower than they did last year. Up 13% since late Nov, Glaxo has lagged the S&P 500 over the last 12 months. But Glaxo possesses what many rivals lack, an industry-leading pipeline and profits poised to pick up speed in ‘08. "The new drug portfolio is better than it has been in the last 5 or 6 years," says Jon Fisher, of Fifth Third Asset Mgmt. "The valuation is not expensive, and the co is positioned to exceed expectations."

“Inside Scoop” section reports that L-1 (ID) founder, Chmn and CEO Robert LaPenta has put his finger on more upside in the co despite a spate of mixed news. Late last week LaPenta plunked down $3M to purchase 200K shares on the open mkt. He boosted his direct holdings to nearly 1.39M shares, but he beneficially controls a total of 10.57M shares, or a 14.6% stake, through a limited partnership. Ben Silverman, of, says LaPenta's transactions are "certainly a bullish signal" by an insider with a strong pedigree in the defense and security industry.

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