Filed under: Deals, Market matters, Anheuser-Busch Cos (BUD), Research in Motion (RIMM), Genentech Inc (DNA), Amgen Inc (AMGN), Gilead Sciences (GILD), Stocks to Purchase, Cramer on BloggingStocks

TheStreet.com’s Jim Cramer says the biotechs look sweet in a bank-led slowdown.

Thank you, New York Times. Remember just a couple of weeks ago, when The New York Times wrote about how Genentech’s (NYSE: DNA) (Cramer’s Take) Avastin was too costly and the stock got cracked down to $77? I know Roche did. I bet that was the last draw. The dramatic decline in the dollar plus a sentiment that has spawned a thousand articles — that life-saving drugs cost too much — gave the Swiss giant a opportunity to bolster its own anemic pipeline by buying what might be the greatest wonder drug of all time in its $43 billion bid, no doubt the beginning price for what will ultimately be a deal close to $100 a share. (I pushed DNA hard here and on “Mad Money” because I’ve been a big believer in Avastin and I’m confident that people will pay anything — or family members will pay anything — for the hope of three or four months or more of life, or the chance of beating cancer altogether.)

I don’t even know where to begin about the positives of this deal. First, it confirms the general trend: the dollar is so weak that it is worth buying anything that’s name-brand if you are from Europe, including Anheuser-Busch (NYSE: BUD) (Cramer’s Take), a total creature of the weak dollar.

It confirms a second trend that the biotechs are the ideal buys when it comes to a bank-led slowdown. Just like in 1990, the biotechs — then led by Amgen (NASDAQ: AMGN) (Cramer’s Take) — produced spectacular results as their earnings shined in the face a collapse in the financials. I purchased Gilead (NASDAQ: GILD) (Cramer’s Take) on Friday for Action Alerts PLUS with the trashing it endured because it spent too much — consider it the Research In Motion (NASDAQ: RIMM) (Cramer’s Take) of the group. Amgen, coincidentally, has been rallying on a better reimbursement environment from the new Medicare bill, an adjunct to DaVita’s (NYSE: DVA) (Cramer’s Take) boost. Don’t forget that the whole group is running, including Biogen (NASDAQ: BIIB) (Cramer’s Take), as the B section of the Journal shows, and Cephalon (NASDAQ: CEPH) (Cramer’s Take), which seems like nothing but net lately.

Finally, there’s the sentiment issue. Each time the press has hit something during this abominable era, it has struck pay dirt. The negativity surrounding DNA was so great that even when it reported better-than-expected earnings, the stock took a hit initially until people realized that Avastin really was growing again. The group is hot, it makes sense, and it should be examined closely as a continual source of gains as we worry about sagging banks and reduced earnings from one of the largest sectors in the market (finance, health care, tech, oil really define this market now).

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RELATED LINKS:
Roche Bids for Rest of Genentech
Feuerstein’s Biotech-Stock Mailbag: Synta
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer was long Gilead Sciences.

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Filed under: Deals, Genentech Inc (DNA)

This morning’s announcement that Roche wants to pay $43.7 billion for the 44.1% of Genentech (NASDAQ: DNA) it doesn’t already own raises the question: “Why is Genentech worth so much to Roche?” The answer: it outperforms its competitors when it comes to innovation.

Roche is offering a 9% premium to Genentech’s market value at Friday’s close. Reuters reports that Roche wants Genentech’s $2.6 billion (2008 estimated sales) Avastin, a colorectal cancer treatment, and Herceptin, a $1.3 billion (estimated 2008 sales) breast cancer drug, as well as Genentech’s drug development portfolio.

Roche also anticipates to save $750 million to $850 million in pretax costs, but the long-term benefit would be for Genentech’s innovative culture to take over the relatively dry drug development environment of Roche. If that doesn’t happen, the deal could be unprofitable for both companies.

How so? According to Building Biotechnology, Genentech’s stock was up 1,190% in the decade ending June 2005. It got there by using the Four Sources of Advantage I first wrote about in my book The Technology Leaders. What are these four?

• Entrepreneurial Leadership – hiring and motivating people who can build new businesses. Genentech does this by encouraging its researchers to spend 25% of their time on projects of their choosing (vs. an industry average of 10%). In 1988, Genentech’s Napoleone Ferrara focused on anti-angiogenesis, which cuts the blood supply to cancer tumors, resulting in Avastin;
• Open Technology – licensing in or acquiring technologies, rather than developing them all in-house.
  Genentech has in-licensed over 100 technologies such as Rituxan, a $2.6 billion (estimated 2008 sales) cancer treatment;
• Boundaryless Product Development – developing products in cross-functional teams rather than scientists working in isolation. Genentech does this by including both technical personnel, relevant business functions, and key outside stakeholders like physicians. Genentech ’s Secreted Protein Discovery Initiative, used genomics to facilitate boundaryless product development, generating five product leads; and
• Disciplined Resource Allocation – Invest in products that can take a massive share of markets with high profit potential, kill products that don’t. CEO, Arthur Levinson, focused Genentech in 1995 on cancer treatment. He kills development projects before they hit clinical trials — which cost between $30 million and $100 million — if the scientific arguments for pursuing the drug can’t withstand his intense scrutiny.

My biggest concern about the Roche deal is that Genentech’s culture would be destroyed once it became wholly-owned by the Swiss pharmaceutical giant. It seems unlikely to me that Levinson could take over the management of Roche, and if he does not, Genentech would be apt to smother Genentech’s more innovative culture.

Investors like this announcement — Genentech stock is up 17.8% in pre-market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Filed under: Business, Developer, Productivity, Web services, web 2.0

The clock just turned 5pm, and if you are like us, everything you have worked on all day has instantly evaporated from your mind (yes, this just happens, we don’t need alcohol). Luckily, we left all those papers on our desk, the scribbled whiteboard, and a monitor-o-sticky notes to help us figure out where we left off.

5pm by QG | Software is a web-based project management suite that provides us the tools needed to get back on track at 8am.

The underlying features of 5pm are fairly standard in the project management world. You create projects and assign them to one or more users or groups. The project can have a deadline, a client, and a priority level. Once you have created a project you can add items such as tasks and files. Tasks can be assigned to individual team members and emails can be sent to the group when tasks are finished. etc…

To help visualize your project over the course of its life, there’s a timeline feature that shows your projects and tasks in a “Gantt” style chart. In addition, there’s a reporting section that can help determine who is completing their projects on time and who isn’t.

Continue reading 5pm - Project management on time (so you don’t have to be)

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Filed under: Before the bell, Earnings reports, Deals, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), Time Warner (TWX), Market matters, American Express (AXP), Bank of America (BAC), Merck and Co (MRK), Genentech Inc (DNA), Hasbro Inc (HAS)

Stock futures were higher this morning after Bank of America joined recent financials and topped Wall Street estimates. Also pushing futures higher is a deal in the pharma sector with Roche bidding almost $44 billion for the rest of Genentech. However, both Merck and Schering-Plough stated they’ll postpone reporting their financial results after the close; Apple will also be reporting results then. Finally, oil prices came off a six-week low and are trading back above $130 a barrel due to escalating Middle East tensions. Higher oil prices could dampen the mood on the Street.

Bank of America Corp. (NYSE: BAC), the biggest U.S. consumer bank and home lender, stated profit fell 41% to $3.41 billion, or 72 cents a share, much better than analysts estimates of 21 cents according to Bloomberg. The bank curtailed loan losses, adding $2.2 billion to loan loss reserves. The bank has finished the buy of Countrywide Financial Corp. on July 1. With these results, BAC joins other big banks that have recently reported better-than-expected results. BAC shares are up 8.6% in premarket trading.

Roche Holding on Monday said it was offering $43.7 billion to take over the remaining 44.1% shares of Genentech Inc. (NYSE: DNA) for $89 per share, 8.8% above DNA’s closing price Friday. DNA shares are up nearly 18% in premarket trading to $96.50.

Yahoo! Inc. (NASDAQ: YHOO) stated Monday morning it settled its fight for control of the board with billionaire investor Carl Icahn. The board will expand to 11 members to include Icahn and the remaining two seats will be filled by the board upon the recommendation of its nominating and governance committee. In addition, Icahn, who owns about 5% on Yahoo common shares, agreed to withdraw his nominees for consideration at the annual meeting and to support the board’s nominees. YHOO shares are declining 2% in premarket trading.

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Filed under: Earnings reports, Deals, Genentech Inc (DNA)

Roche, the Swiss drug maker, has offered to purchase the 45% of biotech giant Genentech (NYSE: DNA) that it does not already own. The offer totals $43.7 billion in cash. According to Reuters, Roche “would offer $89 per share to buy up the remaining stake, a 9 percent premium to the biotech company’s closing share price on Friday.”

The transaction would probably be a poor deal for Genentech holders and the board of the company should reject it and push for a higher price. When reporting quarterly earnings recently, the company raised its outlook to a range of $3.40 to $3.50 per share, from $3.35 to $3.40. Several brokerages made positive comments about Genentech and Citigroup began coverage of the stock as a “buy” with a $91 price target.

Although Genentech’s shares are trading at a 52-week high at nearly $82, the firm is just recovering from rough earnings in last 2007. Early last year, before the rocky patch, the stock traded just below $90. The Genentech’s No.1 drug, cancer treatment Avastin, is expected to do extremely well over the next several years.

The Roche offer does not take into account the fact that Wall St. expects Genentech to be a powerful growth company during the rest of the decade making the stock worth well over $90.

Douglas A. McIntyre is an editor at 247wallst.com.

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