FDA clears new Merck drug for hepatitis C

FDA clears new Merck drug for hepatitis C

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WASHINGTON/NEW YORK (Global Markets) - Merck & Co (MRK.N) won U.S. approval on Friday to sell a new drug considered a major advance against the liver-destroying hepatitis C virus.

Victrelis is expected to help transform treatment of the potentially fatal disease with higher cure rates and shorter courses of therapy for some patients.

A similar medicine from Vertex Pharmaceuticals Inc (VRTX.O) is poised to win FDA clearance later this month. Industry analysts predict sales of more than $1 billion annually for each drug with the Vertex product dominating the market.

Merck shares rose 0.6 percent in after-hours trading to $37.33, up from their $37.08 close on the New York Stock Exchange. Approval of Victrelis was widely expected after a Food and Drug Administration advisory panel recommended the drug in an 18-0 vote in April.

Doctors say tens of thousands of patients have been delaying treatment in anticipation of the new medicines, which still must be taken in combination with older hepatitis drugs. About 170 million people around the world are infected with hepatitis C.

"There are so many patients who are just waiting for a new treatment option. There hasn't been anything new in 10 years," said Dr. Eliav Barr, Merck's head of infectious diseases research.

"We're just thrilled and can't wait to get the medicine out the door to patients," Barr said, adding that Merck was ready to begin shipping the drug within the week.

The cure rate for Victrelis reached 66 percent in Merck's studies, an improvement over the 35 to 40 percent seen with current drugs, but less than the 79 percent reported for newly treated patients given the Vertex drug, telaprevir.

"Victrelis is an important new advance for patients with hepatitis C," Dr. Edward Cox, head of the FDA office of antimicrobial products, said in a statement.

The FDA approved Victrelis for adults with hepatitis C who were never treated or who failed previous treatments.

In the United States, 3.2 million people have hepatitis C, a blood-borne disease that can lead to chronic liver problems, liver cancer, cirrhosis and death. The disease is the leading cause of liver transplants in the U.S.

Both the Merck and Vertex medicines in combination with standard drugs cured some patients in half the time of the current therapy of the injectable drug interferon and a pill called ribavirin. The older drugs require almost a year of treatment and often cause flu-like symptoms that are tough to tolerate.

Prescribing instructions for Victrelis suggest that some patients with early responses to the drug can stop treatment after 28 weeks, while some others can stop at 36 weeks.

The most common side effects reported with Victrelis were fatigue, anemia, nausea, headache and taste distortion, the FDA said.

The drug label recommends monitoring for anemia.

Hepatitis C is spread mainly through sharing needles such as those used for illegal drugs and tattoos, or through blood transfusions before 1992 when screening began. Many people who are infected do not know they have the virus and show no symptoms.

The new medicines work by blocking a protein called protease that the virus needs to replicate. The generic name for the Merck drug is boceprevir. It must be taken three times a day with food.

(Reporting by Lisa Richwine and Bill Berkrot; Editing by Carol Bishopric)

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Express Scripts shares jump as forecast reassures

Express Scripts shares jump as forecast reassures

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(Global Markets) - Shares of Express Scripts Inc (ESRX.O) jumped 10.5 percent as the U.S. pharmacy benefit manager's profit outlook for 2011 was less dire than some investors had feared and the company offered positive financial forecasts through 2014.

Wall Street had been bracing for a lower profit outlook from the company, so the forecast removed some uncertainty hanging over the stock. The long-term projections helped reassure investors about growth prospects.

Express Scripts cut its projected 2011 profit range by about 6 percent, citing higher spending and fewer prescriptions being filled because of consumer worry about the weak economy.

It said spending would be higher due to a contract dispute with drugstore chain Walgreen Co (WAG.N) and in anticipation of integrating its $29 billion purchase of rival Medco Health Solutions Inc (MHS.N).

Express Scripts last month warned investors of potentially weak prescription volume, causing some analysts to lower their profit forecasts and investors to send the stock down.

"A lot of people had been expecting it was going to happen and a lot of them were saying, 'I don't want to own it ahead of that because it could pull back,'" Jefferies & Co analyst Brian Tanquilut said. "But now we're seeing that it's not as bad ... This sets the bottom for the stock."

Separately on Thursday, Express Scripts revealed fiscal forecasts through 2014 in a securities filing on the Medco merger.

The projections, which the company said were prepared a month before the Medco deal was announced and pertained to it as a stand-alone company, offered earnings-per-share estimates that eclipse the average estimates of analysts, according to Thomson Global Markets I/B/E/S.

"Even with a more moderated script view suggested since then, we see this disclosure as providing comforting clarification around future growth," Barclays Capital analyst Lawrence Marsh said in a research note.

Marsh said the annual growth in EBITDA (earnings before interest, taxes, depreciation and amortization) for 2012 to 2014 amounted to about 12 percent, above his expectations of average growth of 8 percent.

The merger filing also revealed that Medco approached Express Scripts about a transaction in early June, more than a month before they announced the deal, and that the companies talked as early as 2006 about a potential combination.

Express Scripts shares were up $3.77 to $39.71 in afternoon trading on Nasdaq. Medco shares were up 6.9 percent to $48.79 on the New York Stock Exchange.

STAGNANT ECONOMY

Express Scripts' lower 2011 profit forecast is the latest sign that Americans are cutting back on healthcare spending to save money because of uncertainty in the economy.

Chief Financial Officer Jeff Hall told an investor conference last month that Express Scripts generally sees prescriptions increase 3 percent to 5 percent in an average year, but there has been virtually no growth over the past three years.

Hall also said the economy had worsened over June and July and the company did not see it improving.

Since Hall's comments, Express Scripts shares had fallen about 16 percent through Wednesday, compared with a 4 percent drop for the S&P 500 index .SPX.

Express Scripts said in a statement on Thursday, "The company now believes that it is more likely than not that the continuing stagnant economic conditions will negatively impact claims volumes to a greater extent than it had anticipated."

It expects prescription claims will fall short of its previous forecast for 750 million to 780 million this year.

Overall, Express Scripts forecast 2011 earnings of $2.95 to $3.05 per share, down from its prior view of $3.15 to $3.25.

The company noted that its revised range still amounts to annual earnings per share growth of between 18 percent and 22 percent.

Since June, Express Scripts has been locked in a contract dispute with Walgreen, which plans to stop filling prescriptions for Express Scripts members starting in January. Express Scripts said it was spending to help clients as they transfer away from Walgreen pharmacies.

The company said it was speeding up spending on some projects to create more capacity in advance of the Medco deal.

"A lot of those costs are one-time," said Gabelli & Co analyst Jeff Jonas. "To the extent that you are pulling forward spending from 2012 into 2011, that means 2012 will be even better."

In cutting its forecast, Express Scripts also pointed to greater competition in the marketplace "resulting in increased client demands and expectations."

5 YEARS IN THE MAKING

The filing revealed that a deal that has been simmering for five years came to a boil in June when Medco Chief Executive David Snow telephoned his counterpart at Express Scripts, George Paz.

Representatives from the two companies held preliminary discussions in 2006 and went as far as to enter into a confidentiality agreement in November of that year, although the agreement expired in 2009, the filing said.

The two sides stayed in touch over the ensuing years, according to the filing, but the preliminary talks did not proceed further.

Last February, Medco's board decided to review alternatives to being a stand-alone company, the filing said.

During 2011, Medco suffered significant contracts losses that raised concerns about its prospects. After reviewing an array of options, the filing said, a committee of the Medco board called the "Medco M&A committee" concluded the best alternative was a merger with Express Scripts and recommended contacting its rival.

Two days later, Snow made the initial call to Paz. The deal was announced on July 21.

(Reporting by Lewis Krauskopf in New York; Editing by Derek Caney and John Wallace)

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Amazon tablet costs $209.63 to make, IHS estimates

Amazon tablet costs $209.63 to make, IHS estimates

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SAN FRANCISCO (Global Markets) - Amazon.com Inc's new tablet computer costs $209.63 to make, IHS iSuppli estimated on Friday, but will sell for $199, highlighting how the e-commerce company is taking a financial hit upfront to get the device into as many hands as possible.

Amazon's billionaire Chief Executive Jeff Bezos unveiled the Kindle Fire at the lower-than-expected price on Wednesday.

The launch sparked concern about a price war at the lower end of the tablet market, currently dominated by devices running on Google Inc's Android operating system from companies such as Samsung Electronics Co Ltd, Motorola Mobility Holdings Inc and HTC Corp.

IHS iSuppli said the components that go into the Kindle Fire cost $191.65. Additional manufacturing expenses bring the total cost to $209.63.

Based on IHS iSuppli's estimates, the company may lose just under $10 on each Fire it sells.

An Amazon spokesman did not comment on IHS's estimates on Friday afternoon.

Since the Fire was unveiled on Wednesday, investors and analysts have speculated Amazon may be selling the device at cost or a loss. The IHS report is one of the first efforts to put meat on the bones of such speculation.

Gene Munster, an analyst at PiperJaffray, estimated earlier this week that Amazon would lose roughly $50 on each Kindle Fire sale.

RAZOR BLADE MODEL

Amazon is hoping the device encourages users to buy more products and services from the company, making up for the upfront losses, according to Wayne Lam, an analyst at IHS iSuppli.

This is a version of the "razor-blade" model in which Procter & Gamble unit Gillette sells razors at a loss and makes up the difference from profitable sales of blades later, Lam explained.

In Amazon's case, the Kindle Fire will stimulate demand for the company's digital content and boost sales of physical goods on its e-commerce websites, according to IHS iSuppli.

"When further costs outside of materials and manufacturing are added in -- and the $199 price of the tablet is factored along with the expected sales of digital content per device -- Amazon is likely to generate a marginal profit of $10 on each Kindle Fire sold," the research firm added.

CAUTIOUS

Amazon's digital music and video business has never gained much traction, said Russ Crupnick, senior entertainment industry analyst for The NPD Group, who noted most people download music and video from Apple Inc's iTunes service, while video streaming is dominated by Netflix Inc.

Kindle Fire users are unlikely to buy a lot more of Amazon's digital music and video with their new device, Crupnick added.

"How long will it take for consumers to get on board with the total tablet entertainment experience?" he said. "I'm cautious."

Even on the successful iPad, users do not download a lot more music and video, Crupnick noted.

So far, tablets are mostly used to access video games such as Angry Birds and for downloading other apps -- and that is where Amazon has the best chance to recoup some of its upfront losses on the Fire, he added.

(Reporting by Alistair Barr; editing by Andre Grenon)

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Kaydon to pay special dividend; shares jump

Kaydon to pay special dividend; shares jump

Stock Market Predictions

(Global Markets) - Specialty ball-bearing maker Kaydon Corp (KDN.N) posted weaker-than-expected quarterly results, but declared a special dividend that sent its shares up as much as 9 percent.

The company -- which has returned $105 million to shareholders through regular cash dividends in the last five years -- will pay a special dividend of $10.50 a share.

"People are likely looking through the near-term operating performance and at the special dividend, and trading the stock up on that," William Blair & Co analyst Samuel Eisner said.

Kaydon will fund the $337 million special dividend through available cash and existing credit.

The company, which makes specialty ball bearings for wind turbines, also forecast 30 percent growth in wind energy revenue for the year, helped by a pick up in turbine installations before a production tax credit expires in 2012.

The production tax credit (PTC) gives a credit of 2.1 cents per kilowatt-hour to an owner of a wind-energy project once a wind turbine begins to produce electricity, and has been a major driver of growth of wind energy in the United States.

"There's normally a rush to get wind energy installations in before the expiration of the tax credit," Eisner said.

He added that the benefit the company was seeing in 2012 was from the industry stocking up before the credit runs out.

For 2012, Kaydon, which also caters to the industrial, aerospace, medical and electronic equipment industries, expects wind energy sales to grow at least 30 percent to $70 million, versus a 44 percent drop in 2011.

Net sales for the fourth quarter rose 3 percent to $108.1 million, but missed analysts' estimates of $122.1 million, as wind energy sales fell more than a fifth and some shipments were deferred.

The deferred wind energy shipments are expected to be released in the first half of 2012, Kaydon said.

Net profit fell by a fourth to $8.7 million, or 27 cents a share.

The Ann Arbor, Michigan-based company's shares jumped to $38.62 on the New York Stock Exchange, their highest since July last year. The stock has gained a third of its value since its year-low last October, excluding Friday's gains.

(Additional reporting by Sayantani Ghosh in Bangalore; Editing by Viraj Nair, Maju Samuel)

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GE tops Wall Street estimates on overseas demand

GE tops Wall Street estimates on overseas demand

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BOSTON (Global Markets) - General Electric Co notched a better-than-expected 21.6 percent rise in earnings, helped by strong demand for jet engines as well as equipment used in oil and natural gas production.

The largest U.S. conglomerate said on Friday its second-quarter results were helped by a rebound in sales of railroad locomotives, which offset weakening demand for wind turbines. With overall orders up 24 percent, pushing the company's backlog to $189 billion, Chief Executive Jeffrey Immelt said he was confident about the rest of the year.

"We are optimistic about our growth prospects in the second half and beyond," Immelt said.

The company's industrial revenues outside the United States were up 23 percent in the quarter, outperforming the overall company, which recorded a 7 percent rise in sales from continuing operations.

Investors said the results showed the Fairfield, Connecticut-based company's focus on emerging markets was paying off.

"GE's strategy of growth in developing nations and energy and infrastructure and healthcare and technology is serving it well," said Perry Adams, vice president and senior portfolio manager at Huntington Private Financial Group, in Traverse City, Michigan, which holds GE shares.

The rise in orders is a key sign that GE will be able to continue its pace of growth, said Nick Heymann, an analyst at William Blair & Co.

"That's the path back to the future," he said.

GE shares were down 5 cents at $19.11 on Friday morning, a day when fellow blue-chip industrial Caterpillar Inc missed profit forecasts, sending its shares sharply lower and weighing on the broader stock market.

Over the past year, GE shares have risen 26 percent, ahead of the 23 percent rise in the Dow Jones industrial average.

PROFIT TOPS STREET VIEW

The world's largest maker of jet engines and electric turbines said second-quarter profit attributable to common shareholders rose to $3.69 billion, or 35 cents per share, from $3.03 billion, or 28 cents per share, a year earlier.

Factoring out one-time items, profit was 34 cents per share. On that basis, analysts had expected 32 cents, according to Thomson Global Markets I/B/E/S.

Revenue fell 3.5 percent to $35.63 billion, reflecting the sale of a majority stake in GE's NBC Universal business to Comcast Corp. Analysts had expected $34.7 billion.

Profit fell 19 percent at GE's energy unit, which incurred large costs to integrate the $11 billion wave of takeovers it made between September and March. Profit margins on renewable energy equipment deteriorated. Demand was split, with sales of equipment used in oil and natural gas production up 39 percent, and electricity-producing gear up just 1 percent.

"If oil keeps going up and if Congress and the president do something more on renewables, which they keep talking about but haven't done, then margins have a long way to expand," said Jack De Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire. "They're doing well to keep margins in those businesses as good as they are."

(Reporting by Scott Malone, additional reporting by Nick Zieminski, Ryan Vlastelica and Roy Strom in New York; Editing by Lisa Von Ahn, John Wallace and Matthew Lewis)

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Coca-Cola says it considers listing in Shanghai

Coca-Cola says it considers listing in Shanghai

Stock Market Predictions

HONG KONG (Global Markets) - Coca-Cola Co (KO.N), the world's largest soft-drink company, said on Wednesday it may explore a possible listing in Shanghai, joining other global firms in testing the waters for a China listing, along with its increasing presence there.

Coke has said it will commit $2 billion in investment into China and last October opened three new plants in Inner Mongolia, Henan and Guangdong.

"We are interested in exploring the opportunity of listing our stock on the Shanghai Stock Exchange," Geoff Walsh, public affairs and communications director for Asia Pacific of Coca-Cola, said in an email reply to Global Markets.

"Obviously, we need to better understand the regulatory framework and listing requirements," Walsh said. "We continue to have positive discussions with Chinese government officials as we look at this opportunity."

Walsh's comments follow a report in the Hong Kong Economic Journal, saying Coca-Cola was studying a possible listing on the proposed international board on the Shanghai Stock Exchange.

HSBC (HSBA.L), Unilever (ULVR.L) and Standard Chartered Plc (STAN.L) have said they want to list on the international board, which was originally slated to be launched in 2010.

The New York Stock Exchange is working with China to launch the country's international board that will allow foreign firms to list on the mainland, in a move seen as a crucial step in developing its capital markets.

(Reporting by Xavier Ng and Donny Kwok; Editing by Jacqueline Wong and Ken Wills)

(This story was corrected in the second paragraph to show Coca-Cola opened new plants in Inner Mongolia, Henan and Guangdong last October (not three plants in Inner Mongolia))

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Brokerages cut Texas Instruments price targets

Brokerages cut Texas Instruments price targets

Stock Market Predictions

(Global Markets) - Atleast seven brokerages cut their price targets on Texas Instruments (TXN.N), a day after the No. 3 chipmaker cut its outlook for the current quarter and warned of lower demand as customers reduce their inventories.

Shares of the company, which makes chips for products ranging from cellphones to industrial equipment, were down 4 percent in early trade on Friday. They were trading down at $28.58 on Friday on the New York Stock Exchange.

The declines in TI's product lines have been larger than expected due to the macro environment, although OMAP -- a category of chip system used for portable and mobile multimedia applications -- continues to be strong, Needham analyst Vernon Essi wrote in a note.

The company's OMAP application processor is a current bright spot as design wins in the Samsung Galaxy Nexus and S2 (005930.KS), Motorola Droid Bionic (MMI.N), Amazon Kindle Fire (AMZN.O), and Barnes & Noble Nook (BKS.N) are buoying sales, FBR Capital Markets said.

Sales of TI's chips used in personal computers are down in the current (fourth) quarter, partly due to a shortage of hard-drives caused by recent flooding in Thailand.

"We continue to expect a seasonally weak first quarter likely marking the trough of the semiconductor cycle," Wedbush analysts wrote in a note.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Supriya Kurane)

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