Nursing home companies fall on final reimbursement rate cuts

Nursing home companies fall on final reimbursement rate cuts

Stock Market Predictions

(Global Markets) - Shares of skilled nursing home operators Kindred Healthcare (KND.N), Skilled Healthcare (SKH.N) and Sun Health Care (SUNH.O) fell in extended trade on Friday, after regulators slashed its final Medicare payments for fiscal 2012.

The Centers for Medicare & Medicaid Services (CMS) cut payments for skilled nursing facilities by 11.1 percent, or $3.87 billion, to correct an unintended spike in payment levels and align Medicare payments with costs.

The CMS had introduced a new model in fiscal 2011 to ensure there would be no change in overall spending levels, but it instead led to a significant increase in Medicare expenditures.

In April, CMS had proposed two options for FY2012, one which would have resulted in a net increase of 1.5 percent in Medicare payments based on inflation or a cut of 11.3 percent in reimbursement rates.

Kindred shares fell 26 percent to $14.01, after closing at $18.84, while those of Skilled Healthcare slid 20 percent to $7.00, from its closing of $8.80 on Friday on the New York Stock Exchange.

Sun Healthcare shares plunged 39 percent to $4.25, after closing at $7 on Nasdaq.

(Reporting by Shravya Jain in Bangalore; Editing by Viraj Nair)

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Travelers to post loss, slow buybacks after storms

Travelers to post loss, slow buybacks after storms

Stock Market Predictions

NEW YORK (Global Markets) - Devastating tornadoes like the twister that hit Joplin, Missouri, last month will push Travelers Cos Inc (TRV.N) to a second-quarter operating loss and force it to slow down share buybacks, the property insurer said on Friday.

The company also warned of worst-case-scenario industry losses on the recent tornadoes in the United States. Travelers is the second major property insurer, after Allstate Corp (ALL.N), to warn of at least $1 billion in second-quarter catastrophe losses from the series of deadly twisters.

Two companies losing nearly $2.5 billion in less than two months is especially noteworthy, since the entire insurance industry lost $13.6 billion to U.S. catastrophes in all of 2010.

Travelers' and Allstate's peers are likely to experience much of the same. MetLife (MET.N) said late Friday its auto and home insurance business lost as much as $153 million more than expected in April and May.

Travelers shares closed 3.1 percent lower, making them one of the biggest drags on the Dow Jones industrial average .DJI and the second-biggest decliner among S&P insurance shares.

Yet one analyst said there was a silver lining in all the catastrophes that could benefit the company.

"We think the record level of worldwide catastrophe losses will provide a catalyst for firmer insurance rates, and see (Travelers) well positioned to leverage that trend," said Standard & Poor's equity analyst Cathy Seifert in a research note, maintaining a "strong buy" rating on the company.

BUYBACKS AT RISK

The global insurance industry has had an unprecedented start to the year. Even without a major hurricane having made landfall, insurers are on track to post their largest catastrophe losses ever, due largely to earthquakes in Japan and New Zealand and a series of once-in-a-century tornadoes.

Analysts have said buyback programs across the industry were at risk, after years of heavy share repurchases that were driven by limited catastrophe losses and few other good options to deploy growing cash piles.

Analysts polled by Thomson Global Markets I/B/E/S had on average expected Travelers to earn $1.29 per share on an operating basis this quarter. Since late April, eight analysts have cut their second-quarter estimates, according to Thomson Global Markets data, but all of them still expected a profit.

As of Friday, none of the 18 analysts reporting earnings estimates on the company had expected it to lose money this quarter. Travelers has beaten Wall Street's average earnings estimate by at least 20 cents per share for the last three quarters in a row.

$1 BILLION LOSS

The difference this time is the weather. Travelers said Friday that its after-tax catastrophe losses for April and May were likely to be between $1 billion and $1.05 billion.

That is double what the company said it would expect to lose for all catastrophes in an average year, based on its long-term modeling.

As a result, the company will buy back less than $250 million in stock in the second quarter. In the first quarter, repurchases topped $1.1 billion.

In the second half of the year, Travelers said repurchases would be about $400 million in excess of operating income. As of late January, the company's total authorization for repurchases was $6.5 billion.

Travelers shares closed down $1.87 at $59.21. At those levels the stock was at its lowest point in nearly two months.

(Reporting by Ben Berkowitz; editing by John Wallace, Dave Zimmerman, Gary Hill)

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Sanofi hit from EU Lovenox copies seen minor: broker

Sanofi hit from EU Lovenox copies seen minor: broker

Stock Market Predictions

PARIS (Global Markets) - French drugmaker Sanofi (SASY.PA) faces limited impact from proposals that could make it easier for generic competitors to sell a biosimilar version of its blood-thinner Lovenox in Europe, Deutsche Bank analysts said on Friday.

Although the European Medicines Agency wants to update its guideline on biosimilar drugs, the brokerage reckons that the drug's much lower price in Europe than in the United States and competition from similar treatments could deter generic drugmakers from developing cheap copies of Lovenox.

"While the entire loss of EU Lovenox sales by 2015 would lower our EPS (earnings per share) by 4 percent, in practice we see no more than 1-2 percent EPS sensitivity," the analysts said in a note to investors.

Despite its having lost patent protection, there are no Lovenox biosimilars in Europe because current guidelines require a comparative clinical trial in each of its six indications.

Novartis' (NOVN.VX) generic unit Sandoz, which sells a biosimilar version of Lovenox in the United States with Momenta Pharmaceuticals (MNTA.O), has said this process would be too expensive.

Sales of Lovenox, once one of Sanofi's multi-billion euro selling products, totaled 1.1 billion euros ($1.6 billion) in the first half of 2011.

Sanofi shares, which have lost around 10 percent of their value since the start of the year, were trading virtually unchanged at 52.52 euros at 1425 GMT (10:25 a.m. EDT).

($1 = 0.707 Euros)

(Reporting By Elena Berton; Editing by Christian Plumb and Ben Hirschler)

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Lockheed in up to $980 million U.S. missile shield deal

Lockheed in up to $980 million U.S. missile shield deal

Stock Market Predictions

WASHINGTON (Global Markets) - Lockheed Martin Corp (LMT.N) has won a five-year follow-on contract worth up to $980 million for work on U.S. missile defense command control, battle management and communications, the Defense Department said Friday.

The ordering period under the sole-source contract is from January 1, 2012, through December 31, 2016, the Pentagon said in a digest item, without specifying the overall system at issue.

(Reporting By Jim Wolf)

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U.S. retailers trim Europe plans on region's debt woes

U.S. retailers trim Europe plans on region's debt woes

Stock Market Predictions

LONDON (Global Markets) - A string of big-brand U.S. retailers may curb their UK and European expansion plans, deterred by the region's bleak consumer outlook and nervousness over the unfolding sovereign debt crisis in the euro zone.

"With the economic conditions a lot of retailers are asking themselves whether it's worthwhile to enter the UK (market) given that it's very competitive and saturated," Robert Gregory, research director of consultancy Planet Retail, said.

U.S. retailers to have added a note of caution to their UK and Europe plans include homeware retailers Crate & Barrel and Williams-Sonoma, clothing retailer Forever 21, and Victoria's Secret owner Limited Brands, sources said.

The tempering of plans is a setback for the UK retail sector which has seen several U.S. retailers target greater footprints in that country, seeking to replicate the successes of Apple and Abercrombie & Fitch and then access Europe.

Crate & Barrel has put its UK plans on hold until Europe's debt crisis abates, a first source familiar with the matter said.

Crate & Barrel Chief Executive Barbara Turf told a retail property conference on Wednesday the company was "slowing down" its international expansion plans, but that it hoped to open stores in the UK in the next 3-4 years.

Cushman & Wakefield's head of cross border retail, Mark Burlton, said U.S. retailers had been increasingly influential and active players in the UK market.

"My instinct would tell me that U.S. retailers have been the biggest takers of space in terms of square feet," Burlton said, citing Forever 21, which opened large stores on London's Oxford Street and in Westfield's Stratford City mall in 2011.

However, their increasing cautiousness has paralleled the worsening European debt crisis, which has brought upheaval to the governments of Greece and Italy and has sapped consumer confidence across EU countries.

U.S. Treasury Secretary Tim Geithner was in Europe this week to lobby the region's leaders ahead of a key EU Summit on Friday. On Thursday, he said the U.S. and global economy had strong interests in efforts to strengthen the euro.

TENTATIVE STEPS

Analysts expect Britain's retail pain to worsen as shoppers cut back on non-essentials and slash spending, worn down by stagnant wage growth, government austerity measures and uncertain job prospects.

Against this backcloth, several property agents told Global Markets that some U.S. retailers were sitting out the crucial Christmas period in the UK and Europe, traditionally the busiest shopping period of the year, to see if the New Year brought better prospects for expansion to those markets.

Williams-Sonoma, which manages the Pottery Barn furnishing chain, is planning to open UK stores in 2013, two other sources told Global Markets, contradicting previous reports it would open its first London store in early 2012. It wanted more visibility on how the euro zone debt crisis would play out before deciding to expand, one of the two sources said.

Limited Brands, which is opening its first Victoria's Secret store on New Bond Street next year, may also take longer to roll out its cosmetics chain Bath & Body Works into the UK and Europe on similar concerns, a fourth source close to the company said.

Forever 21 was also taking a cautious approach to its European expansion although it is still opening stores, a source with knowledge of the matter said.

Williams-Sonoma and Forever 21 declined to comment. A Limited Brands spokesperson said "we have made no announcements about Bath & Body Works in the UK, and Victoria's Secret will open there as planned."

Burlton said it was unlikely such retailers' cautiousness towards expansion would last long.

"There's only a very slight cooling off just with the euro zone crisis, but brands recognize now that the only way they can get growth is by becoming international ... they've no choice but to have to investigate new markets," he said.

James Ebel, a director at retail property consultancy Harper Dennis Hobbs, said while retailers had taken notice of the euro zone crisis, any that were paring back plans were the exception than the norm.

"I'm still receiving quite a lot of interest from American retailers coming to the UK," he said. "There hasn't been a time, within the last 10 years, when U.S. retailers have been so interested in coming to Europe as there is now."

(Reporting by Brenda Goh; Editing by Andrew Macdonald)

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PetroChina shares jump on NDRC gas rise rumors

PetroChina shares jump on NDRC gas rise rumors

Stock Market Predictions

HONG KONG (Global Markets) - Oil major PetroChina (0857.HK) posted its biggest intraday percentage gain in eight months on Friday, surging more than 5 percent in Hong Kong on rumors that China may announce a natural gas price rise and a broker upgrade.

PetroChina (601857.SS), the country's largest oil and gas producer, has nearly half of its reserves in natural gas.

Analysts said the market was speculating that the National Development and Reform Commission may announce another domestic natural gas price hike, a move made more imminent by the collapse of talks between Russia and China to resolve an elusive 30-year gas supply deal on Friday.

"A much needed natural gas price hike would help PetroChina minimize the economic loss of importing expensive overseas gas," said Gordon Kwan, an analyst at Mirae Asset Securities in Hong Kong.

Merrill Lynch upgraded the Hong Kong listed stock to buy from neutral on Thursday, saying that PetroChina's parent CNPC may inject its oil assets in Sudan into the listed company.

Other analysts were more dubious on the Sudan asset injection happening in the near term given ongoing disputes between the country's Muslim North and Christian South over profit sharing.

PetroChina's shares were up 3.4 percent by 0715 GMT, strongly outperforming the benchmark Hang Seng Index's .HSI 0.9 percent drop.

(Reporting by Farah Master; Editing by Jonathan Hopfner)

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FDA okays Boston Scientific stent despite concerns

FDA okays Boston Scientific stent despite concerns

Stock Market Predictions

(Global Markets) - The U.S. Food and Drug Administration has approved a Boston Scientific Corp heart stent, despite concerns about a rare but potentially serious problem, because its benefits still outweigh the possible risks.

The agency approved the Promus Element Plus drug-eluting heart stent late on Tuesday, seven months sooner than expected. Boston Scientific shares rose as much as 5.3 percent on Wednesday.

The decision followed a disclosure by the agency on Friday that it was investigating instances in which the stents - tiny tubular devices made of wire mesh - were found to shrink or lengthen after implantation.

The Promus Element is designed to be thinner and more flexible to make its delivery to the artery easier. Complaint reports about the device show it can become deformed in cases where there is calcification of the artery, a twisted blood vessel or faulty placement by the surgeon.

"While additional data collection is ongoing and will continue into the postmarket, the totality of the information available and considering the addition of appropriate information in the labeling led to the conclusion that the Promus Element provides a reasonable assurance of safety and effectiveness," an FDA spokeswoman said in an email response to Global Markets on Wednesday.

The FDA said the problem, known as longitudinal deformation, has occurred most frequently with Boston Scientific's Ion stent, approved in the United States earlier this year, and the Promus Element, which had been available outside the United States.

The FDA said it viewed both devices as safe when used for authorized indications, but added it was working with the manufacturers to understand the problem.

The approval for the Promus Element Plus stent is an important step that will allow Boston Scientific to replace the Promus stent it co-markets with Abbott Laboratories.

Boston Scientific plans to market the U.S. stent immediately and awaits approval in Japan by mid-2012. It expects the combined launches will add $200 million to its gross margin after 2012.

In response to a Global Markets query, Boston Scientific said an evaluation of worldwide complaints concerning the Promus Element, as of October 31, showed 136 longitudinal stent deformation events per 829,372 units sold.

Of a total of 133 patients in whom longitudinal stent deformation was reported, new stents were implanted in 76 patients and 4 patients underwent surgery.

The FDA action quelled concerns on Wall Street that regulatory approval of the Promus Element would be delayed due to concerns about the deformation cases.

Michael Matson, an analyst with Mizuho Securities, said the approval is key to the company's margin expansion efforts.

"While we continue to watch this issue closely, we think that the Promus Element approval may indicate that FDA is not overly concerned about longitudinal compression," Matson wrote in a research note. "We continue to believe that Boston Scientific is in the early stages of a turnaround in terms of both revenue growth and margins. The Promus Element approval should help on both fronts."

Boston Scientific shares were up 4 cents to $5.35 on the New York Stock Exchange after trading as high as $5.59 earlier in the session.

(Reporting by Debra Sherman; editing by Michele Gershberg, Dave Zimmerman and Andre Grenon)

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