Thursday, December 06, 2007


The WSJ discusses big pharma, saying that over the next few years, the pharma business will hit a wall. Some of the top-selling drugs in industry history will become history as patent protections expire, allowing generics to rush in at much-lower prices. Generic competition is expected to wipe $67bn from top co’s annual US sales between 2007 and 2012 as more than three dozen drugs lose patent protection. That is roughly half of the companies' combined ‘07 US sales. At the same time, the industry's science engine has stalled. The century-old approach of finding chemicals to treat diseases is producing fewer and fewer drugs. Especially lacking are new blockbusters to replace old ones. The coming sales decline may signal the end of a once-revered way of doing business. "I think the industry is doomed if we don't change," says Sidney Taurel, chmn of Eli Lilly (LLY). Just yesterday, Bristol-Myers (BMY) announced plans to cut 10% of its work force and close or sell about half of its 27 manufacturing plants by 2010. Pfizer (PFE) will be particularly hard-hit when the patent expires as early as 2010 on Lipitor. By 2012, Merck (MRK) will face generic competition to its 3 top-selling drugs. Other co’s mentioned: SGP, GSK, WYE, NVS and SNY. Article suggests that big pharma will continue acquiring biotech co’s, like GENZ and DNA.

“Ahead of the Tape” discusses Toll Brothers (TOL), which has one of the largest supplies of land in the industry. Based on its rate of sales over the past 12mo’s, Toll has enough land to last for 8.4ys, compared with an industry avg of 5.3ys, says Ivy Zelman, of Zelman & Associates. While many builders are cutting home prices to burn through high-cost land, Toll has largely held its prices. But even Toll, which is fortunate to have a lot of older, lower-cost and well-located land, may have to fess up to the increasingly grim mkt. Toll forecast that it would write down $250-450m in assets in its F4Q, and many analysts believe it will come at the high end of that range when it reports earnings before the mkt opens today. "You reach a point where you can no longer avoid writing off assets on your books," says Paul Puryear, of Raymond James. "My gut reaction tells me that Toll Brothers is perhaps one of the co’s with more medicine to take before this thing is over."

Barron’s Online “Inside Scoop” section reports that CFO of Brookfield Homes (BHS), Paul Kerrigan, sold $2.5m in stock Tue. The sale was the first by a Brookfield Homes insider in at least 4ys. Kerrigan sold a combination of existing holdings and 35K newly acquired shares, acquired through an options exercise for $1 per share. The options vested one day before Kerrigan's exercise and were not set to expire until 2012.

The NY Post has learned that NBC boss Jeff Zucker is expected to make big cuts on the newsgathering and operational side of the co's news division, including eliminating an entire level of MSNBC's mgmt team, in a bid to save between $20-40m. Sources inside or close to NBC yesterday claimed the cuts, which are expected to come down this week or next, will be weighted evenly between NBC News and MSNBC. CNBC staffers are being shielded from this round of cuts b/c Zucker wants the network to be at full strength now that the battle with Fox Business Network has begun.

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