Interview: Jabil Circuit
>> earnings out after the bell from the contract manufacturer jabil circuit. what jabil said is, excluding items, it earned 33 cents a share in the company’s recent quarter. it had been expected to earn 33 cents so matching analysts’ expectations. sales coming in in line with analysts’ forecasts at $1.9 bill. the company saying that for the fourth quarter it anticipates earning 35 to 37 cents a share. analysts on average anticipating 36 cents. in terms of fourth-quarter sales, jabil is forecasting two to $2.1 billion in sales. analysts, just over $2 billion at $2.03 so sales potentially coming in stronger than anticipated. human genome sciences, a company with a mission, maker of gene-based drugs, trying to get it first drug to market , currently with seven candidates in clinical development. suzy assaad spoke with the chief executive, thomas watkins, about the company’s future.
>> on the vernal of having a couple of drug candidates about to move into phase iii and we’re very excited. our focus as a company is on commercializing promising drug candidates, all of which come out of the genomic discovery that our company was founded on 13 years ago.
>> tell us about when you expect these products to get into phase iii and of course, the question, when will you have the first drug on the market ?
>> predicting when a drug will be on the market is sometimes difficult because there are many factors that come together. but we have our two lead compounds in terms of time, at a stage where we are just now unblinding phase ii results. some earlier this year and some later this year, that will allow us, together with the f.d.a. and our partners, make decisions about moving the candidates forward. i would say, in the next few months, we will likely be a company with at least one phase iii candidate moving forward.
>> the company was founded in 1992 by the former c.e.o. why did it take so long from 1992 up until this point to get a candidate into phase iii?
>> well, as you know, the company is based on or founded on the genomics technology or area of genomics and our founder, my predecessor, distinguished scientist and pioneer in research, had the vision of taking the power of genomics and translate it into promise therapeutics and all of us have realized that doing that takes a lot more time and a terrific combination of scientific skills brought together so it’s taken us longer, as all companies have found, to harness the power of genomics and we’ll do it.
>> when you say “harness the power of genomics,” what treatments eventually do you think you will be able to produce?
>> we have three programs, now, one in immunology, in the area of immune suppression. one in the area of hepatitis b treatment and one in cancer. two of those three programs are based on genomic technology, genomic targets from our original work in genomics research more than a decade ago, very promising areas that a number of companies are working on but are exciting for providing new therapies to patients in need where we’re very excited about moving them forward as quickly as we can toward commercialization to help patients.
>> can you give us a ballpark of when commercialization may happen? five years, a couple of years?
>> i’d say within the next few years. it’s difficult to predict when we’re still unblinding clinical results. within the next few years, we have two of these compounds that we’re very excited about for the near term and that depends upon what the phase ii and early phase iii drugs show us. are the drugs safe, are they effective? how do they compare to existing therapies in the market ? i would tell you, within the next relatively short period of time, hopefully measured increasingly in months, not years, we’ll be a commercial company.
>> that was thomas watkins, chief executive of human genome sciences. sticking with healthcare stories, americans with private health insurance got no reprieve from cost increases last year. medical expenses for each person rose 8.2%, the same rate of increase seen in 2003. this, according to a new study. and for the fourth year in a row, employers in 2005 increased workers’ share of the cost of health insurance. employees paid high deductibles and co-payments. prescription drug payment accounted for 21% of the overall increase in healthcare spending. drug costs rose at a rate of 7.2%, slower than the nearly 9% pace in 2003. the study was conducted by the center for studying healthcare system change. taking a break, when we return, a little more than a week from the next federal reserve decision on interest rates. big names disagreeing about what the fed in fact will do and after the break, we’re going to hear from pimco’s bill grows and morgan stanley―bill gross and stephen roach.
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bell.” ford motor cutting its 2005 earnings forecast for the second time since april. profit expected to be $1 to $1.25 a share if you exclude costs, compared to the company’s previous forecast of $1.25 to $1.50 a share. the company said it would cut 5% of salaried positions in north america and eliminate bonuses for salaried management employees. ford cited expectations for lower vehicle sales as well as weaker results in the north american region. the other big story this tuesday, crude oil. prices fell but not before reaching a record price for a third straight session. there is speculation the energy department report, due out tomorrow, may show inventories of diesel and heating oil did, in fact, rise. prices have surged on concern there will not be enough supplies to meet peak demand in the fourth quarter of 2005. futures went from a session high of $59.70 a barrel to a session low in the final hour of floor trading. other energy prices today where we saw declines for gasoline, heating oil, as well as natural gas futures. and in terms of stocks, certainly the influence of oil was felt. the s&p declined as energy shares were the biggest drag on the index. the nasdaq ending the day up .1%, lehman brothers upgraded the telecommunications chip industry. let’s find out more about the influence of oil during the trade today. we have deirdre bolton joining us with a closer look. deirdre?
>> we did, in fact, see, about, well, 15 of the groups we track on the s&p 500 closing lower. that would leave us with nine that closed higher. some say oil at these levels is holding the market back.
>> oil gets into record territory, definitely puts a brake on the stock market . you look at how oil has impacted the stock market in the last year. when oil is up, the market really can’t go up. and we’re subject to the potential for a type of shock.
>> counter intuitively, energy stocks were the biggest drags on the market . exxon-mobil, conocophillips and marathon oil moved down on the session but the group is the best performing year to date, up 22%, versus the s&p 500’s unchanged level for the year. higher energy prices hurt retail stocks. home depot, lowe’s, limited and target declined, the thinking that more consumers pay at the pump for gasoline, the less they are likely to spend elsewhere. higher energy is not the only factor influencing trade. some say markets have resisted further declines in the face of higher petroleum because the fed might soon stop raising rates.
>> the other news is good if you look at where we are in the interest rate cycle. we are close to the end of fed tightening. that’s why we see an underpinning of demand for securities.
>> bank such as washington mutual, fifth third bancorp and bank of america all rose. semiconductor stocks closed up, intel, texas instruments and broad broadcom advanced after lehman brothers upgraded its investment rating on the industry. part of the reason for the call, compelling valuations.
>> we’ll continue the look at the market . we have deborah kostroun file this report from the big board.
>> crude oil touched another record high but we didn’t close on that. we saw a reversal in crude oil. it closed lower. this is on ideas that maybe the energy department report tomorrow may show rising u.s. inventories of oil and so one of the things we also saw, our largest one-day slide for the s&p 500 energy index in almost six weeks was also the biggest drag of the 24 industry groups in the s&p 500. 28 members of that index were lower, only one was higher on the day, that was unocal. unocal at a record high. that after cnooc saying it may bid $20 billion for unocal, challenging chevron’s bid for that company. a lot of questions about supplies and china using a lot of fuel supplies as their g.d.p. growth and in fact we just heard yesterday that china increased their production of steel by 38% during the month of may. now, it looks like nucor, which is the number two u.s. steel producer, saying their second-quarter profit will be near the low end of their april forecast, because of a decline in the price of scrap steel and all of this comes as china is actually increasing their production and it’s really causing price declines not only in the u.s. but also in europe. looking at the biggest gainer in the dow jones industrial average, that was hewlett-packard on the day. shares at their highest price since late january 2004. hewlett-packard rated a new buy in coverage by an analyst at solay securities, with the price target of $29 a share. a jury says boston scientific stents infringe on two patents owned by johnson & johnson which may cost boston scientific almost $2 billion in damages. that stock was higher while other medical device makers were lower on the day. i’m deborah kostroun at the new york stock exchange for bloomberg news.
>> at the nasdaq, tech and telecom stocks helping lead the nasdaq higher. robert gray filed this report.
>> the nasdaq higher in the session, the only one of the three major averages to post gains in the session which saw crude oil rise to record levels on the nymex before closing lower on the day. looking at the trading in industry groups, computer-related shares the best performers. telecom stocks rising and transports were higher. the big weakness in the biotech group today. one of the calls helping boost stocks in the session came from lehman brothers raising semiconductor stocks to a positive from a neutral. that pushed the philadelphia semiconductor index higher on the session. the s.o.x. had risen 15% from april 15 through june 2 and had been―is now down still some 2% for the month of june. lehman says they see improving profit margins for the chip stocks and chip companies and improving stock performance for the chip shares. pmc-sierra rising on the day, lehman upgrading it to equal rate, raising the target to $10 for p.m.c. intel and broadcom rising, as well. peter boockvar from miller tabak saying lehman’s call helped the action but the trading was more that the market drifted to the path of least resistance, which was higher for nasdaq stocks and reality will come with preannouncements in the coming few weeks and earnings come in no better than in line because a stronger dollar will be a headwind to upside surprises. thomson financial saying the ratio of s&p 500 companies lowering earnings forecasts to those making positive surprises is the highest since the first quarter of 2003. biomet, one of those, came out disappointing investors with its forecast and those shares falling. gilead with a negative as merrill lynch saying they expect negative growth there. at the nasdaq, i’m robert gray.
>> deal news to report. china’s biggest offshore oil and natural gas producer may make an offer for unocal and if so, it would top the bid by chevron. cnooc may offer $20 billion in cash, according to those familiar with the plan, topping an offer from chevron by 15%. the offer of $71.50 a share, also 8% higher than unocal’s closing price yesterday. cnooc would have to pay chevron a half billion dollar breakup fee. even with the high price, investor marc faber says cnooc has nothing to lose.
>> would look in the future very smart and if the price goes down, it still forces the american hand in approving it and showing the chinese can acquire assets that are part in the u.s.
>> china is the world’s second largest user of oil after the u.s. and the chinese government is allowing companies to expand abroad in order to gain access to raw materials to meet demand in the $1.65 trillion annual economy. even more news out of china on the deal front. higher group, refrigerator maker, has partnered with two buyout firms to offer about $1.3 billion for maytag, a 13% premium over the offer maytag accepted may 19 from a group led by ripplewood holdings. the latest offer comes from a partnership between higher along with bain capital and blackstone group. a.g. edwards’ analyst bill o’grady says the move reminds him of the japanese move about 15 years ago when japanese firms turned from investing in treasuries to u.s. companies.
>> i think it’s a broader theme we’ll see accurate in -- accelerate in coming months as china tries to diversify its dollar-based asset class away from just holding treasuries to more direct investing in other assets.
>> when we return from the break, human genome sciences has seven drug candidates in clinical development but yet to get his first product to market . what does the c.e.o. have to say? we’ll tell you straight ahead.
