Oppenheimer & Co.---Henry, Scott---Pharmaceutical Analyst
>> indonesian officials say that the bird new has killed two more people. a sister and a brother. the deaths come as indonesia investigates a different family cluster as six members dieded of the bird flu. it’s possible that limited human to human transmission may have occurred in the large cluster. but they stress the virus has not yet mutated. well, concern of course about bird flu is sending some biopharmaceutical stocks higher. novavax is one of 30 companies that are working to try to develop a bird flu vaccine. joining us from boston to talk about this and the players and where novavax falls is scott henry. he covers the stock over on oppenheimer and he has a neutral on the stock this morning. let’s start off talking about novavax. what are your thoughts about this company?
>> well, i think a lot of investors are looking to play the bird flu, and i think you have to know what you’re getting into. at this point, i believe the bird flu stock, probably more speculation than investing. you’re looking for sentiment to continue to change which is driven by the media attention more so than cash flows and some of your traditional metrics that we would invest upon. so, you know, kind of buyer beware. it can work, sentiment can move stock for a while, but it’s nice to have a backbone of cash flows at some point.
>> so then is novavax given that you say nobody really knows who’s going to come into the race first with a vaccine, who in your opinion is at the leading edge of this, in what seems to be a crowded field right now.
>> well, i think, you know, the reality is that bird flu draws the attention, but what investors want to dig into is improved vaccine technologies. we make vaccines inside of eggs which is more of a dinosaur technology. at some point, we will have a new generation of vaccine manufacturing. and that’s where i think the real investment play is. a lot of these companies are in that field, novavax is looking to make vaccines in a quicker fashion. i think that’s what you’re playing for. but right now, the picture is blurry. it is hard to get from the science to the cash flows.
>> well, who else other than novavax?
>> i think some of the more developed pharmaceutical companies have new vaccines coming out on the market that are very exciting. look at merck who has an h.p.v. vaccine coming out. last night, they had a vaccine for shingles that was approved. those are the traditional ways that i think you can play the vaccine market . you’re looking to speculate, you can look at the early stage companies.
>> who are the early stage companies?
>> i think novavax is one of them. they can make them inside the insect-cell lines. and if they can do this, they can cut the lead time from six months down to six weeks. and i think that’s where the advance is because no one really knows what a bird flu vaccine will look like. if you make the wrong vaccine ahead of time, it’s not going to do any good. for the concept of improving lead times is real, i think that’s where the technology should be focused on. for us, you know, we’d like to buy the stock when the hype is at the low point, not at the high point which is where it is.
>> is that the novelty for novavax in terms of the new technology? it’s about the lead time and how quickly you can turn it around?
>> well, there are a couple of ways to look at vaccine technology. you can either make a strain of a vaccine that no one else has, a proprietary vaccine. you can make the product that makes it manufacture quicker or come up with an adjuvant, and novavax is making it quicker, making an adjuvant to boost the power of the vaccine. that’s interesting in the company. the bird flu side of it is more hype than reality.
>> speaking then of―is there another company that you prefer to nnovavax? maybe roche?
>> i think for long-term investors, i would look at some of the larger pharmaceutical companies. some of the companies that will be around, and you can participate in the trend towards more uses of vaccines. that would include merck or a company such as roche. we do not cover either of those companies, but i think that would be the area to look. is to look for the cash flows.
>> all right. thank you very much, we appreciate it, scott.
>> thanks for having me.
>> scott henry of oppenheimer. please stay with us, everybody.
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Listen On the markets---Suzy (fast)
NYSE---Julie (slow)
Ford ---Greg (slow)
>> good morning. this is “ on the markets .” i’m suzy assaad. it’s 10:30 here in new york. our top stories of this hour, the u.s. consumer confidence dropping to the lowest level since last fall. consumer spending and incomes go up. but also, so does inflation. at least according to one gauge that’s supposedly watched by the fed. ford is paying its highest u.s. interest rates ever. the automaker is peddling bonds that will yield as much as 10.6%. g.m. gets an upgrade over at prudential. citing labor relations, early retirements for the raising the stock from a neutral to a buy. as for the overall stock, their going up as well this morning. the dow jones industrials is up a third of a percent. the s&p is up a quarter. the nasdaq also up a third of 1%. but for a little bit more on the overall action, we check in with our market reporter, connell mcshane and julie hyman at the nyse.
>> thanks, suzy. i’m looking at initial public offerings, capping off the busiest start since 2000. the initial public offering i’m looking at today is called mueller water. it’s spun off from a home builder called walter industries and raising $400 million in the initial share sale. this company supplies water and sewer pipes and they sold 25 million shares at $16 each. now, remember, earlier in the week, there was a little bit of concern about the i.p.o. market . we had a couple of cancelled i.p.o. vonage declining by about 13% in the first day of trading. mueller is faring pretty well today. the shares rose as much as 5% and right now they’re up around 3%. if you look at walter industry, the parent company, those shares are not faring so well in today’s session. they are trading lower. also, just wanted to know, we had another water i.p.o. earlier in the month. they make systems to treat contaminated groundwater. six million shares at $12 each and those are up more than 20%. also, i want to check on the i.p.o.s, the high-profile i.p.o.s that we had earlier in the week. we had mastercard weakening a little bit. vonage shares are rising for the first time since their i.p.o. remember, they fell not only on that first day of trading, but also another more than 10% on the second day of trading. looks like the roles are reversed in today’s session. keith pruett & wood said they are planning a deal. we know that will be coming. now we’ll send it to connell.
>> heading into a long weekend, julie, a number of traders talking to me throughout the week about the key technical level short term and then something to watch for down the line. short term when i was here yesterday, keep an eye on the 2200, see if the nasdaq gets above that level and see where it goes from there. see if we’re able to post a weekly gain after the struggles earlier in the week. the nasdaq composite fell by about 1.1%. but we are above that 2200 level at 2205, up by .3% in today’s trading. last friday, the composite closed about 2193. but year to date, you can see the nasdaq is unchanged, so it has been an underperformer. and the s&p is up 2% this year. the dow is up by nearly 5%. so very important here to keep this rally the last couple of days in some sort of context. i was just looking at some of the best and worst-performing stocks in the nasdaq this year. even with gains in recent days, some of the big names are still having very, very tough years. take for example intel which hit a three-year low earlier this week. that stock is some of the worst perform es in the index. in the nasdaq 100 this year. down by 27% year the date. talked a lot about ebay. the partnership with yahoo, but remember, ebay is a stock that’s pulled back a lot this year. it’s down by about 21%. so important to keep some perspective on the rally of the last couple of days. with that said, the bulls are happy to see the nasdaq composite get above that 2200 level.
>> thank you. ford has become the most unloved stock in the s&p 500. that’s according to data and our own greg miles turns up at the bloomberg terminal. let’s see what he found out.
>> hard to overstate just how skeptical investors and analysts are about ford. well, ford is replacing general motors as the automaker that wall street is most bearish about. they’re the lowest rated stock and analysts are slapping sell ratings on stock of the number three automaker. 58% of analysts covering it have a sell rating up from 21%. in all, 100% of analysts granted a sell as they grow skeptical about the turnaround that decline fears investors who sent ford shares up 4% this year. the outlook for g.m.’s profits is improving, ford’s is worsening. the big concern is the money losing with the north american auto operations.
>> they’re losing market share at a rapid rate and i’m not sure they can cut the costs fast enough. so it will be a real rough ride here in 2006.
>> while general motors beats first quarter forecasts, ford missed. and analysts say profits could fall 50% this year. ford plans to slash up to 40,000 jobs and close 14 plants in north america. analysts say ford is cutting costs way too closely. ford sales declines will accelerate this year as general motors takes market share in s.u.v.’s and pickup trucks.
>> it as a bat battle between the two titans this year. i think ford will get its butt kicked this year.
>> and ford’s turn around effort is making progress.
>> we have slowed the rate of decline of losing share. the other thing that we have said is that we would be bringing out products that the consumers want the buy. if you look at the new products that we introduced, the fusion, the milan and the zephyr, they’re doing extremely well in the marketplace and they’re taking share not only from the domestics but from the japanese.
>> but analysts they a turnaround is a long ways away. suzy?
>> thank you very much, greg miles. in the meantime, there are two more people who died of bird flu and the race is on to find a vaccine. so find out which potential vaccine makers are stocking up and their stock is up 270% in the last year.
