Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
REVIEW & OUTLOOK OCTOBER 21, 2008 Socking It to Small Business
The Obama plan is an incentive to hire fewer workers.
Barack Obama declared last week that his economic plan begins with "one word that's on everyone's mind and it's spelled J-O-B-S." This raises the stubborn question that Senator Obama has never satisfactorily answered: How do you create more jobs when you want to levy higher tax rates on the small business owners who are the nation's primary employers?
Loyal Democrats have howled over the claim that small businesses will get soaked by the Obama tax plan, so we thought we would seek an authority they might trust on the issue: Democratic Senate Finance Chairman Max Baucus of Montana. Here is what Mr. Baucus wrote in a joint press release with Iowa Republican Charles Grassley on August 20, 2001, when they supported the income tax rate cuts that Mr. Obama wants to repeal:
". . . when the new tax relief law is fully phased in, entrepreneurs and small businesses -- owners of sole proprietorships, partnerships, S corporations, and farms -- will receive 80 percent of the tax relief associated with reducing the top income tax rates of 36 percent to 33 percent and 39.6 percent to 35 percent."
Then they continued with a useful economics tutorial:
"Experts agree that lower taxes increase a business' cash flow, which helps with liquidity constraints during an economic slowdown and could increase the demand for investment and labor."
Twelve Senate Democrats voted for those same tax cuts. And just to be clear on one point: An increase in "the demand for investment and labor" translates into an increase in J-O-B-S. So if lowering these tax rates creates jobs, then it stands to reason that raising these taxes will mean fewer jobs. From 2003 to 2007 with the lower tax rates in place, the U.S. economy added eight million jobs, or about 125,000 per month. The Small Business Administration says small business wrote the paychecks for up to 80% of new jobs in 2005, for example.
Mr. Obama's tax increase would hit the bottom line of small businesses in three direct ways. First, because 85% of small business owners are taxed at the personal income tax rate, any moderately successful business with an income above as little as $165,000 a year could face a higher tax liability. That's the income level at which the 33% income tax bracket now phases in for individuals, and Mr. Obama would raise that tax rate for those businesses to 36%.
Second, the Obama plan phases out tax deductions (the so-called PEP and Pease provisions), thus raising tax rates imposed on this group by another 1.5 percentage points. Finally, Mr. Obama would require many small business owners to pay as much as a four-percentage-point payroll tax surcharge on net income above $250,000. All of this would bring the federal marginal small business tax rate up to nearly 45%, while big business would continue to pay the 35% corporate tax rate.
Mr. Obama responds that more than nine of 10 small businesses would not pay these higher taxes. Last Thursday he scoffed in response to the debate over Joe the Plumber, saying that not too many plumbers "make more than $250,000 a year." He's right that most of the 35 million small businesses in America have a net income of less than $250,000, hire only a few workers, and stay in business for less than four years.
However, the point is that it is the most successful small- and medium-sized businesses that create most of the new jobs in our dynamic society. And they are precisely the businesses that will be slammed by Mr. Obama's tax increase. Joe the Plumber would get hit if he expanded his business and hired 10 to 15 other plumbers. An analysis by the Senate Finance Committee found that of the filers in the highest two tax brackets, three out of four are small business owners. A typical firm with a net income of $500,000 would see its tax burden rise to $166,000 a year under the Obama plan from $146,000 today.
According to a Gallup survey conducted for the National Federation of Independent Business last December and January, only 10% of all businesses that hire between one and nine employees would pay the Obama tax. But 19.5% of employers with 10 to 19 employees would be socked by the tax. And 50% of businesses with 20 to 249 workers would pay the tax. The Obama plan is an incentive to hire fewer workers.
For many months Mr. Obama and his band of economists have claimed that taxes don't matter much to growth or job creation. But only last week Mr. Obama effectively admitted that even he doesn't believe this. His latest "stimulus" proposal includes a $3,000 refundable tax credit for businesses that hire new workers in 2009 or 2010.
So what sense does it make to offer targeted and temporary tax relief for some small businesses, while raising taxes by far more and permanently on others? Raising marginal tax rates on farmers, ranchers, sole proprietors and small business owners is no way to stimulate the economy -- and it's certainly no way to create J-O-B-S.
Please add your comments to the Opinion Journal forum.
OT WSJ EDITORIAL
If the current polls hold, Barack Obama will win the White House on November 4 and Democrats will consolidate their Congressional majorities, probably with a filibuster-proof Senate or very close to it. Without the ability to filibuster, the Senate would become like the House, able to pass whatever the majority wants.
Though we doubt most Americans realize it, this would be one of the most profound political and ideological shifts in U.S. history. Liberals would dominate the entire government in a way they haven't since 1965, or 1933. In other words, the election would mark the restoration of the activist government that fell out of public favor in the 1970s. If the U.S. really is entering a period of unchecked left-wing ascendancy, Americans at least ought to understand what they will be getting, especially with the media cheering it all on.
The nearby table shows the major bills that passed the House this year or last before being stopped by the Senate minority. Keep in mind that the most important power of the filibuster is to shape legislation, not merely to block it. The threat of 41 committed Senators can cause the House to modify its desires even before legislation comes to a vote. Without that restraining power, all of the following have very good chances of becoming law in 2009 or 2010.
- Medicare for all. When HillaryCare cratered in 1994, the Democrats concluded they had overreached, so they carved up the old agenda into smaller incremental steps, such as Schip for children. A strongly Democratic Congress is now likely to lay the final flagstones on the path to government-run health insurance from cradle to grave.
Mr. Obama wants to build a public insurance program, modeled after Medicare and open to everyone of any income. According to the Lewin Group, the gold standard of health policy analysis, the Obama plan would shift between 32 million and 52 million from private coverage to the huge new entitlement. Like Medicare or the Canadian system, this would never be repealed.
The commitments would start slow, so as not to cause immediate alarm. But as U.S. health-care spending flowed into the default government options, taxes would have to rise or services would be rationed, or both. Single payer is the inevitable next step, as Mr. Obama has already said is his ultimate ideal.
- The business climate. "We have some harsh decisions to make," Speaker Nancy Pelosi warned recently, speaking about retribution for the financial panic. Look for a replay of the Pecora hearings of the 1930s, with Henry Waxman, John Conyers and Ed Markey sponsoring ritual hangings to further their agenda to control more of the private economy. The financial industry will get an overhaul in any case, but telecom, biotech and drug makers, among many others, can expect to be investigated and face new, more onerous rules. See the "Issues and Legislation" tab on Mr. Waxman's Web site for a not-so-brief target list.
The danger is that Democrats could cause the economic downturn to last longer than it otherwise will by enacting regulatory overkill like Sarbanes-Oxley. Something more punitive is likely as well, for instance a windfall profits tax on oil, and maybe other industries.
- Union supremacy. One program certain to be given right of way is "card check." Unions have been in decline for decades, now claiming only 7.4% of the private-sector work force, so Big Labor wants to trash the secret-ballot elections that have been in place since the 1930s. The "Employee Free Choice Act" would convert workplaces into union shops merely by gathering signatures from a majority of employees, which means organizers could strongarm those who opposed such a petition.
The bill also imposes a compulsory arbitration regime that results in an automatic two-year union "contract" after 130 days of failed negotiation. The point is to force businesses to recognize a union whether the workers support it or not. This would be the biggest pro-union shift in the balance of labor-management power since the Wagner Act of 1935.
- Taxes. Taxes will rise substantially, the only question being how high. Mr. Obama would raise the top income, dividend and capital-gains rates for "the rich," substantially increasing the cost of new investment in the U.S. More radically, he wants to lift or eliminate the cap on income subject to payroll taxes that fund Medicare and Social Security. This would convert what was meant to be a pension insurance program into an overt income redistribution program. It would also impose a probably unrepealable increase in marginal tax rates, and a permanent shift upward in the federal tax share of GDP.
- The green revolution. A tax-and-regulation scheme in the name of climate change is a top left-wing priority. Cap and trade would hand Congress trillions of dollars in new spending from the auction of carbon credits, which it would use to pick winners and losers in the energy business and across the economy. Huge chunks of GDP and millions of jobs would be at the mercy of Congress and a vast new global-warming bureaucracy. Without the GOP votes to help stage a filibuster, Senators from carbon-intensive states would have less ability to temper coastal liberals who answer to the green elites.
- Free speech and voting rights. A liberal supermajority would move quickly to impose procedural advantages that could cement Democratic rule for years to come. One early effort would be national, election-day voter registration. This is a long-time goal of Acorn and others on the "community organizer" left and would make it far easier to stack the voter rolls. The District of Columbia would also get votes in Congress -- Democratic, naturally.
Felons may also get the right to vote nationwide, while the Fairness Doctrine is likely to be reimposed either by Congress or the Obama FCC. A major goal of the supermajority left would be to shut down talk radio and other voices of political opposition.
- Special-interest potpourri. Look for the watering down of No Child Left Behind testing standards, as a favor to the National Education Association. The tort bar's ship would also come in, including limits on arbitration to settle disputes and watering down the 1995 law limiting strike suits. New causes of legal action would be sprinkled throughout most legislation. The anti-antiterror lobby would be rewarded with the end of Guantanamo and military commissions, which probably means trying terrorists in civilian courts. Google and MoveOn.org would get "net neutrality" rules, subjecting the Internet to intrusive regulation for the first time.
It's always possible that events -- such as a recession -- would temper some of these ambitions. Republicans also feared the worst in 1993 when Democrats ran the entire government, but it didn't turn out that way. On the other hand, Bob Dole then had 43 GOP Senators to support a filibuster, and the entire Democratic Party has since moved sharply to the left. Mr. Obama's agenda is far more liberal than Bill Clinton's was in 1992, and the Southern Democrats who killed Al Gore's BTU tax and modified liberal ambitions are long gone.
In both 1933 and 1965, liberal majorities imposed vast expansions of government that have never been repealed, and the current financial panic may give today's left another pretext to return to those heydays of welfare-state liberalism. Americans voting for "change" should know they may get far more than they ever imagined.
Thanks, jbog. Note that Reni Benjamin is off by about a quarter on the cash-usage projection.
First Take
GTC Biotherapeutics Inc. (GTCB)
Price: $0.32 (10/07/2008 - Intraday), Price Target: $4.00,
Market Cap(MM):$32.9, Rating: Market Outperform
Reni Benjamin, Ph.D., Senior Biotechnology Analyst
FDA Accepts ATryn BLA Filing – Triggers $2 MM Milestone from OVATION
BLA Filing Accepted By FDA Yesterday, GTC Biotherapeutics announced that the FDA accepted for review, the Biologics License
Application (BLA) for ATryn, a recombinant human antithrombin with anti-coagulant and anti-inflammatory properties. The BLA is for the prophylaxis of deep vein thrombosis (DVT) in patients with antithrombin hereditary deficiency (ATHD) undergoing high risk surgical and obstetric procedures. On September 4, 2008, the FDA granted a Priority Review designation for ATryn’s BLA which is intended for products addressing large areas of unmet medical need as well as for products that have the potential to be a substantial improvement over the current standard of care.
In addition, the FDA’s Blood Products Advisory Committee has an action date of February 7, 2009, which has been affirmed by the FDA following a preliminary review of the BLA Due to the achievement of these milestones, GTC Biotherapeutics has received $2 MM in milestone payments from its partner OVATION Pharmaceuticals, a privately owned company. If the BLA is approved, ATryn could be launched in the U.S. by 1H09.
Fruitful Collaboration With OVATION The goal of GTC’s partnership with OVATION Pharmaceuticals is to develop and market ATryn in the U.S. in both ATHD as well as other acquired anti-thrombin deficiencies such as the heparin resistance (HR) in patients undergoing surgery requiring cardiopulmonary bypass.
According to the partnership agreement, GTC Biotherapeutics will manufacture ATryn for use in clinical trials and commercialization, and in return, receive payments for ATryn used in clinical trials and a transfer price on commercial
product. In return, OVATION will fund GTC Biotherapeutics future costs of clinical development and is responsible for marketing ATryn in the U.S. GTC Biotherapeutics will receive payments associated with clinical, regulatory, and sales milestones as well as low 20% royalty on sales. Altogether, GTC Biotherapeutics may receive up to $257 MM in potential milestone payments, including $3 MM after closing, a $2 MM payment with acceptance of the BLA filing and a $4 MM payment upon approval.
Platform Technology Continue To Generate Shareholder Value As a reminder, ATryn was already approved and launched in Europe
last year by partner LEO Pharma, a privately owned company, for the treatment of patients with antithrombin hereditary deficiency
(ATHD). In order to expand the use and market potential of ATryn, LEO Pharma is actively enrolling patients in a Phase 2 study in
disseminated intravascular coagulation (DIC) associated with severe sepsis. Top-line results from this trial should be available in 2H09.
Cash Position Extended – Remains Overhang For Time Being At the end of 2Q08, GTC had cash and cash equivalents of
approximately $12.2 MM. With the addition of $5 MM in milestone payments expected in 3Q08, and a projected quarterly burn rate of
$12.8 MM, we estimate that the current cash position should fund operations into 1Q09.
Quick Take We are reiterating our Market Outperform / Speculative Risk rating and our 12-month target price of $4. Our 12-month price target of $4 is derived by applying a 6x multiple to our 2013 revenue estimate of approximately $226 MM, and a 35% annual discount rate. Today’s news reaffirms our belief that ATryn would be moving quickly in the U.S. regulatory process. In our opinion, GTC Biotherapeutics’ transgenic protein technology encompasses a broad platform to cost-effectively address the production of complex plasma proteins for use as therapeutics. Furthermore, we believe the company’s platform allows for a more cost-effective method to produce biogenerics. However, investors should be aware that to date, our models do not take into account the recent OVATION partnership. We continue to await further clarity regarding the company’s financial situation and delisting strategies before re-evaluating our model and valuation methodologies.
'Th-th-th-that's all folks!'
LLY, $70
http://www.reuters.com/article/americasDealsNews/idUSTRE49530S20081006
who thinks barney frank sounds like Elmer Fudd? I do
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES New York Times
Published: September 30, 1999
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.
''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.
''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''
Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
What They Said About Fan and Fred
House Financial Services Committee hearing, Sept. 10, 2003:
Rep. Barney Frank (D., Mass.): I worry, frankly, that there's a tension here. The more people, in my judgment, exaggerate a threat of safety and soundness, the more people conjure up the possibility of serious financial losses to the Treasury, which I do not see. I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios. . . .
Secretary Martinez, if it ain't broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?
* * *
House Financial Services Committee hearing, Sept. 25, 2003:
Rep. Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. . . .
* * *
House Financial Services Committee hearing, Sept. 25, 2003:
Rep. Gregory Meeks, (D., N.Y.): . . . I am just pissed off at Ofheo [Office of Federal Housing Enterprise Oversight] because if it wasn't for you I don't think that we would be here in the first place.
Fannie Mayhem: A History
A compendium of The Wall Street Journal's recent editorial coverage of Fannie and Freddie.
And Freddie Mac, who on its own, you know, came out front and indicated it is wrong, and now the problem that we have and that we are faced with is maybe some individuals who wanted to do away with GSEs in the first place, you have given them an excuse to try to have this forum so that we can talk about it and maybe change the direction and the mission of what the GSEs had, which they have done a tremendous job. . .
Ofheo Director Armando Falcon Jr.: Congressman, Ofheo did not improperly apply accounting rules; Freddie Mac did. Ofheo did not try to manage earnings improperly; Freddie Mac did. So this isn't about the agency's engagement in improper conduct, it is about Freddie Mac. Let me just correct the record on that. . . . I have been asking for these additional authorities for four years now. I have been asking for additional resources, the independent appropriations assessment powers.
This is not a matter of the agency engaging in any misconduct. . . .
Rep. Waters: However, I have sat through nearly a dozen hearings where, frankly, we were trying to fix something that wasn't broke. Housing is the economic engine of our economy, and in no community does this engine need to work more than in mine. With last week's hurricane and the drain on the economy from the war in Iraq, we should do no harm to these GSEs. We should be enhancing regulation, not making fundamental change.
Mr. Chairman, we do not have a crisis at Freddie Mac, and in particular at Fannie Mae, under the outstanding leadership of Mr. Frank Raines. Everything in the 1992 act has worked just fine. In fact, the GSEs have exceeded their housing goals. . . .
Rep. Frank: Let me ask [George] Gould and [Franklin] Raines on behalf of Freddie Mac and Fannie Mae, do you feel that over the past years you have been substantially under-regulated?
Mr. Raines?
Mr. Raines: No, sir.
Mr. Frank: Mr. Gould?
Mr. Gould: No, sir. . . .
Mr. Frank: OK. Then I am not entirely sure why we are here. . . .
Rep. Frank: I believe there has been more alarm raised about potential unsafety and unsoundness than, in fact, exists.
* * *
Senate Banking Committee, Oct. 16, 2003:
Sen. Charles Schumer (D., N.Y.): And my worry is that we're using the recent safety and soundness concerns, particularly with Freddie, and with a poor regulator, as a straw man to curtail Fannie and Freddie's mission. And I don't think there is any doubt that there are some in the administration who don't believe in Fannie and Freddie altogether, say let the private sector do it. That would be sort of an ideological position.
Mr. Raines: But more importantly, banks are in a far more risky business than we are.
* * *
Senate Banking Committee, Feb. 24-25, 2004:
Sen. Thomas Carper (D., Del.): What is the wrong that we're trying to right here? What is the potential harm that we're trying to avert?
Federal Reserve Chairman Alan Greenspan: Well, I think that that is a very good question, senator.
What we're trying to avert is we have in our financial system right now two very large and growing financial institutions which are very effective and are essentially capable of gaining market shares in a very major market to a large extent as a consequence of what is perceived to be a subsidy that prevents the markets from adjusting appropriately, prevents competition and the normal adjustment processes that we see on a day-by-day basis from functioning in a way that creates stability. . . . And so what we have is a structure here in which a very rapidly growing organization, holding assets and financing them by subsidized debt, is growing in a manner which really does not in and of itself contribute to either home ownership or necessarily liquidity or other aspects of the financial markets. . . .
Sen. Richard Shelby (R., Ala.): [T]he federal government has [an] ambiguous relationship with the GSEs. And how do we actually get rid of that ambiguity is a complicated, tricky thing. I don't know how we do it.
I mean, you've alluded to it a little bit, but how do we define the relationship? It's important, is it not?
Mr. Greenspan: Yes. Of all the issues that have been discussed today, I think that is the most difficult one. Because you cannot have, in a rational government or a rational society, two fundamentally different views as to what will happen under a certain event. Because it invites crisis, and it invites instability. . .
Sen. Christopher Dodd (D., Conn.): I, just briefly will say, Mr. Chairman, obviously, like most of us here, this is one of the great success stories of all time. And we don't want to lose sight of that and [what] has been pointed out by all of our witnesses here, obviously, the 70% of Americans who own their own homes today, in no small measure, due because of the work that's been done here. And that shouldn't be lost in this debate and discussion. . . .
* * *
Senate Banking Committee, April 6, 2005:
Sen. Schumer: I'll lay my marker down right now, Mr. Chairman. I think Fannie and Freddie need some changes, but I don't think they need dramatic restructuring in terms of their mission, in terms of their role in the secondary mortgage market, et cetera. Change some of the accounting and regulatory issues, yes, but don't undo Fannie and Freddie.
* * *
Senate Banking Committee, June 15, 2006:
Sen. Robert Bennett (R., Utah): I think we do need a strong regulator. I think we do need a piece of legislation. But I think we do need also to be careful that we don't overreact.
I know the press, particularly, keeps saying this is another Enron, which it clearly is not. Fannie Mae has taken its lumps. Fannie Mae is paying a very large fine. Fannie Mae is under a very, very strong microscope, which it needs to be. . . . So let's not do nothing, and at the same time, let's not overreact. . .
Sen. Jack Reed (D., R.I.): I think a lot of people are being opportunistic, . . . throwing out the baby with the bathwater, saying, "Let's dramatically restructure Fannie and Freddie," when that is not what's called for as a result of what's happened here. . . .
Sen. Chuck Hagel (R., Neb.): Mr. Chairman, what we're dealing with is an astounding failure of management and board responsibility, driven clearly by self interest and greed. And when we reference this issue in the context of -- the best we can say is, "It's no Enron." Now, that's a hell of a high standard.
OCTOBER 1, 2008, 4:18 P.M. ET Eli Lilly in Talks to Acquire ImClone
By MATTHEW KARNITSCHNIG, SHIRLEY WANG and JEANNE
Eli Lilly and Co. is in advanced talks to acquire ImClone Systems Inc. for about $6.1 billion, according to people familiar with the matter.
The Indianapolis-based pharmaceutical maker is the unnamed "large pharma company" that ImClone Chairman Carl Icahn has said was prepared to acquire the company for about $70 a share, pending a review of its books, the people said.
On Monday, ImClone set a deadline of midnight Wednesday for a deal but it was unclear whether an agreement with Lilly would be reached by then.
A formal offer by Lilly could prompt Bristol-Myers Squibb Co. to increase its offer for the company. Bristol already owns about 17% of the biotech company and co-markets Erbitux, a lucrative cancer drug, with ImClone in the U.S. Bristol has already submitted an unsolicited $62-a-share bid of its own for ImClone.
Last week, Bristol-Myers said it was prepared to launch a hostile takeover of ImClone. Mr. Icahn derided Bristol's offer as "absurd" in the face of the mystery suitor's tentative bid. Mr. Icahn has said the rival deal wouldn't be subject to financing.
Monday, ImClone said that the unnamed suitor would make a decision to on its offer by end of the day Wednesday, and that ImClone would also reveal the suitor's name.
Like other drug makers, Lilly is having trouble getting new drugs through its drug development pipeline. Friday, the Food and Drug Administration for a second time delayed the decision on whether or not to approve Lilly's potential blockbuster heart drug, Prasugrel. The safety of its diabetes drug Byetta is currently being scrutinized by the FDA as well.
Erbitux, which is approved for colon and head and neck cancers and had $1.3 billion in sales in 2007, would be a major addition to Lilly's oncology business. The company currently has two cancer medicines on the market, Alimta, used to treat a form of lung cancer, and Gemzar, which is approved to treat several types, including lung, pancreatic, ovarian and metastatic breast cancer.
But Gemzar, which brought in $1.6 billion in 2007 worldwide sales, will lose patent protection in 2010. Lilly has only one cancer drug, enzastaurin, for non-Hodgkin's lymphoma, in late-stage clinical testing. Its other experimental cancer medicines are in early- or mid-stage development.
Bill v. Barack on Banks
Clinton instructs Obama on finance and Phil Gramm.
A running cliché of the political left and the press corps these days is that our current financial problems all flow from Congress's 1999 decision to repeal the Glass-Steagall Act of 1933 that separated commercial and investment banking. Barack Obama has been selling this line every day. Bill Clinton signed that "deregulation" bill into law, and he knows better.
Maria Bartiromo reports that she asked the former President last week whether he regretted signing that legislation. Mr. Clinton's reply: "No, because it wasn't a complete deregulation at all. We still have heavy regulations and insurance on bank deposits, requirements on banks for capital and for disclosure. I thought at the time that it might lead to more stable investments and a reduced pressure on Wall Street to produce quarterly profits that were always bigger than the previous quarter.
"But I have really thought about this a lot. I don't see that signing that bill had anything to do with the current crisis. Indeed, one of the things that has helped stabilize the current situation as much as it has is the purchase of Merrill Lynch by Bank of America, which was much smoother than it would have been if I hadn't signed that bill."
One of the writers of that legislation was then-Senator Phil Gramm, who is now advising John McCain, and who Mr. Obama described last week as "the architect in the United States Senate of the deregulatory steps that helped cause this mess." Ms. Bartiromo asked Mr. Clinton if he felt Mr. Gramm had sold him "a bill of goods"?
Mr. Clinton: "Not on this bill I don't think he did. You know, Phil Gramm and I disagreed on a lot of things, but he can't possibly be wrong about everything. On the Glass-Steagall thing, like I said, if you could demonstrate to me that it was a mistake, I'd be glad to look at the evidence.
"But I can't blame [the Republicans]. This wasn't something they forced me into. I really believed that given the level of oversight of banks and their ability to have more patient capital, if you made it possible for [commercial banks] to go into the investment banking business as Continental European investment banks could always do, that it might give us a more stable source of long-term investment."
We agree that Mr. Clinton isn't wrong about everything. The Gramm-Leach-Bliley Act passed the Senate on a 90-8 vote, including 38 Democrats and such notable Obama supporters as Chuck Schumer, John Kerry, Chris Dodd, John Edwards, Dick Durbin, Tom Daschle -- oh, and Joe Biden. Mr. Schumer was especially fulsome in his endorsement.
As for the sins of "deregulation" more broadly, this is a political fairy tale. The least regulated of our financial institutions -- hedge funds -- have posed the least systemic risks in the current panic. The big investment banks that got into the most trouble could have made the same mortgage investments before 1999 as they did afterwards. One of their problems was that Lehman Brothers and Bear Stearns weren't diversified enough. They prospered for years through direct lending and high leverage via the likes of asset-backed securities without accepting commercial deposits. But when the panic hit, this meant they lacked an adequate capital cushion to absorb losses.
Meanwhile, commercial banks that had heavier capital requirements were struggling to compete with the Wall Street giants throughout the 1990s. Some of the deposit-taking banks that were allowed to diversify after 1999, such as J.P. Morgan and Bank of America, are now in a stronger position to withstand the current turmoil. They have been able to help stabilize the financial system through acquisitions of Bear Stearns, Washington Mutual, Merrill Lynch and Countrywide Financial.
Mr. Obama's "deregulation" trope may be good politics, but it's bad history and is dangerous if he really believes it. The U.S. is going to need a stable, innovative financial system after this panic ends, and we won't get that if Mr. Obama and his media chorus think the answer is to return to Depression-era rules amid global financial competition. Perhaps the Senator should ask the former President for a briefing.
We Need to Recapitalize the Banks
Let's have cash infusions in return for warrants.
By EDMUND S. PHELPS
When the speculative fever finally broke in America's housing industry and house prices began falling in search of equilibrium levels, banks everywhere suffered defaults and subsequent losses on a range of assets. In short order, the housing contraction morphed into a banking crisis.
David GothardAmong most economists, it came as a surprise that the banking industry and, indeed, most of the financial sector, was so devoted to houses. We had not realized that the investment and innovation in the country's business sector was largely getting by on rich uncles, a tiny cottage industry of venture capitalists out West, and a few private-equity funds doing alternative energy. And we didn't foresee that a trillion or two of losses in an economy with $40 trillion of financial wealth could bring high anxiety and, two weeks ago, near panic.
The banks' losses might seem poetic justice after their abominable performance. But costly feedback effects on the rest of us are in prospect. Uncertainty over the quantity and valuation of banks' "toxic assets" has meant that many cannot count on loans from each other to meet daily needs, and this illiquidity in the markets has impaired their ability to lend. Among banks that had excessively leveraged their capital through borrowing and other devices, the losses wiped out much or all of their capital, and this near-insolvency has dampened their willingness to lend.
The resulting credit contraction is starting to crimp working capital and investment outlay at small businesses and is having wider effects on business activity through its impact on interest rates, exchange rates and consumer loans. This feedback is causing a fall of employment on top of the direct effect of the housing contraction on employment in construction and finance. The added fall in jobs will in turn add to mortgage defaults.
Will this chain reaction produce a deep slump, like Japan's in the 1990s or, worse, America's in the 1930s? In my view, the claim by Keynesians that the economy can be stabilized around a satisfactory employment level, thanks to economic science, is false. So is the claim by latter-day neoclassicals that such stability is automatic, thanks to the market. Both dogmas fatally miss the point that the normal activity level is driven by structural shifts, which monetary policy and price-level changes usefully accommodate but cannot reverse. The end of the speculative fever and the credit crunch each have structural effects on the real prices of business assets, real wages, employment and unemployment. As I see it, the former has pushed up the normal, or "natural," volume of structural unemployment. The latter (and the excess houses) is pushing the economy into a temporary slump. It will last as long as required for the banks' self-healing and government therapy to pull us out of it and into the neighborhood of our new, postboom normalcy.
I believe that leaving the process of recovery entirely to the healing powers of the banking industry, as libertarians suggest, would be imprudent, even if the banks could manage it. Lacking much government intervention, Japan's recovery took a decade. Sweden's recovery, with state intervention, took hardly any time at all.
Right now our banking industry is barely operational. Whatever the corrective surgery indicated, the priority is to get the system operating again. Delay would be costly and risky.
The most discussed of the proposed programs would address banks' toxic assets by authorizing the Treasury to buy them, issuing debt to finance the purchase. Proponents of this program add that the government's eventual sale of the assets purchased might repay the investment with a profit -- grossing, say, an 8% rate of return while paying 4% interest.
House Republicans and some economists object, saying that the government could attain its goal with a bigger or surer profit by selling the banks "default insurance" on their distressed assets: the premiums paid are hoped to far exceed the default costs. To me, government entry into the default insurance business is little different from government purchasing the assets. It is not clear to me that selling default insurance would be more profitable.
House Democrats want a parallel program that would help defaulting mortgage borrowers to avoid foreclosure -- to help them "stay in their homes." Such a step might set an undesirable precedent in economic policy. If, after investing in my vocational training, I cannot make it in the line of work I chose -- not at the real wage that the market has since established, at any rate -- will I be entitled to help from the government to "stay in my work"? Furthermore, many defaulters are housing speculators not families caught up in an adjustable rate mortgage they did not understand. Finally, the overinvestment in houses does not present the systemic risk of economic breakdown that the overextension of credit does.
However, the program to revive the operation of the banks through purchase of the toxic assets faces a sticky wicket. If the government sets the prices too low, the banks will supply little of their assets; they will prefer to hold them to maturity in order to get the price appreciation for themselves. The Treasury will then need to raise the terms. But that may cause the banks to hold off longer, speculating on still better terms ahead.
If, instead, the Treasury sets its prices too high, its funds will go far enough to buy only a portion of the toxic assets offered in response. Thus, it is not certain that such a program would work to clean out the toxic assets at all quickly. Subnormal operation of the banking industry might drag on for a few years.
A program of asset purchases, however needed, is limited in scope. It cannot be counted on to increase the equity capital of the banks -- to shore up their solvency. Underpaying for the toxic assets would actually inflict a further loss of capital. Overpaying the banks for their toxic assets could contribute capital, but that may not be politically feasible or attractive.
So it is clear that the main prong of any "rescue" plan must serve to advance the recapitalization of the banks. Cash transfusions in return for warrants are a good way to do it, as it lets taxpayers share in the upside. The rescue of Chrysler used warrants. This past Monday the FDIC got $12 billion in preferred stock and warrants in the deal that saw Citigroup buy Wachovia. The question is which banks are to be thrown a lifeline, which will have to sink or swim. This one-time dose of corporatism is unpleasant, though the banking industry is to blame for its necessity.
But these steps toward making the system operational again will leave it dysfunctional. We don't want to restore the system as it was. And the risk that the industry would cause another round of wreckage is not the only reason.
What has occurred is not just an old-fashioned banking crisis but also a banking scandal. Most of the big banks were shot through with short-termism, deceptive practices and self-dealing. We must institute basic changes in corporate governance and in management practice to restore responsibility and honesty for the sake of the economy and for the self-respect of the country.
We also need to return investment banking to its roots. There is more to the influence of the financial sector than merely its effects when it goes off the rails. The financial system is not a sort of circulatory system that passively carries fresh saving to the places in the economic body that demand the greatest investing -- as if guided by some "invisible hand." Judgment and vision -- of bankers, fund managers, angel investors and the rest -- matter hugely. So do the distortions, the limits and the license created by the regulatory system and the moral climate. To prosper and advance, the American business sector is going to need a financial system oriented toward business, not "home ownership."
Mr. Phelps, the winner of the 2006 Nobel Prize in economics, directs the Center on Capitalism and Society at Columbia University.
Pfizer is currently leading cancer drug development related to the insulin-like growth factor (IGF) pathway, but faces competition from Roche, Amgen, ImClone, and others, investigators said. The IGF receptor target was identified roughly 20 years ago, and increasing evidence is now showing that the IGF pathway may be involved in human cancer progression.
The company will be closely monitoring whether use of diabetic drug metformin enhances the effect of its anti-IGF-I receptor antibody currently in development for non-small cell lung cancer (NSCLC), investigators added.
Dr Anna Barker, deputy director at the National Cancer Institute, said the link between diabetes and cancer is currently one area of intense investigation. She estimated that the obesity and diabetes pandemic will cause an additional 30-40% increase in incidence of total solid tumour cancers over the next 10 years – notably in breast, prostate, and colorectal cancer.
About 20 years ago, IGF-1 receptors were first found on tumour cells, but at that time, the concept that they could be drug targets was ahead of its time, said Dr Michael Pollak, an IGF-1 pioneer who has published over 250 research papers, and holds the Alexander-Goldfarb Research Chair in Medical Oncology at McGill University in Montreal.
In the mid-1990s, Pollak’s group at McGill, in collaboration with investigators at Harvard University, found a relationship between high levels of IGF in the patient’s blood and the risk for some cancers. This led to more intensive studies of the relationship between insulin-like growth factors and neoplasia. “Now we have indirect evidence that IGF biology has something to do with cancer treatment,” Pollak said.
Pollak, an oncologist who studies cancer biology and IGF-1 at McGill, said there is an unusually high level of competition in drug development related to targeting the IGF-I receptor. More than a dozen companies are currently in the race to market, including Merck, Amgen, Roche, and ImClone.
Pfizer’s fully human IgG2 antibody CP-751,871 has currently advanced to Phase III trials for the treatment of advanced NSCLC. “Scientists want to see the results of clinical trials that test the hypothesis that targeting the IGF-I receptor will benefit cancer patients. Nobody is pushing it as fast as Pfizer,” said Pollak.
The Pfizer Phase III trial was preapproved by the FDA, and the endpoints were discussed. Pfizer wanted to make sure the design met all FDA requirements. “That’s my understanding, they reached an agreement,” stressed Pollak. “Of course, the IGF targeting agents could disappoint and have no activity in Phase III, but early results certainly justify accelerated research. These Phase III studies are absolutely critical,” said Pollak.
Dr Antonio Gualberto, head of Pfizer’s global R&D clinical program for CP-751,871, said extensive work was done internally to select this compound. Dose limiting toxicities have not been identified yet clinically. Roche, Amgen, and ImClone also have IGF-1R compounds, but are in early Phase II trials.
One side-effect of IGF inhibitors is hyperglycemia, or high blood sugar, which is related to the drug’s mechanism of action. Pfizer’s drug does not block insulin action, by design – but might cause modest hyperglycemia, noted Pollak. Still, the hyperglycaemia issue is modest, and co-administration of metformin, an agent often used in diabetes treatment, usually controls it.
From what we know now, it is unlikely the Pfizer’s compound will fail due to reasons of safety. There are over 500 patients treated, said Pollak. “We never had to stop a drug because of uncontrollable hyperglycaemia,” added Pollak, who noted the rationale for clinical trials of IGF-I receptor targeting was as strong as the rationale for research programs that eventually led to the development of Avastin and Herceptin, cancer drugs that target other cell signalling systems.
Dr CK Wang, an oncologist with the Cancer Institute of Dallas, agreed that IGF is definitely a viable target, but there is a lot of competition. Pfizer’s compound will inevitably be compared to both Tarceva and Avastin, current biologic treatments used in lung cancer. The hyperglycemia is controllable, and although Pfizer’s drug will offer another option, Wang believed it is unlikely to replace the current standard of care.
In 2002, Pfizer made two important decisions regarding IGF drug development, said Gualberto. One was the move from targeting small molecules, to monoclonal antibodies that have a higher specificity for IGF. The second decision was to target a different type of immunoglobulin, called IgG2, which has a lower affinity regarding fixation to complement, which will hopefully lower the risk for cytotoxicities, Gualberto added.
The structural diversity in the hinge region of IgG subclasses entails differences in their ability to activate complement. Out of the four IgG classes, only IgG3 has an approximate half-life of 7, in comparison to 21 days for the other classes. Pfizer’s IGF compound has a half-life of approximately 20 days, said Gualberto. The hematological toxicities and shorter half-life of IgG1 antibodies may be important factors when combined with chemotherapy, as the majority of the chemotherapy regimens are given once every three weeks and already have some degree of hematological toxicity, he said.
ImClone’s IMC-A12 is a fully human, anti-insulin-like growth factor-1 IgG1 receptor monoclonal antibody. OSI Pharmaceuticals is developing a small molecule IGF-1R compound (OSI-906) currently in Phase I trials.
Kinase inhibitors by Bristol-Myers Squibb and OSI Pharmaceuticals do potentially block insulin as well as IGF-I receptors, said Pollak. They are very interesting compounds and in some ways have the potential to be more potent cancer drugs, but they are potentially more dangerous and may carry more severe risks for hyperglycemia. “That is why their Phase I dose escalations are very small, and are being examined cautiously,” he added. The results of early trials of these agents have not yet been published.
Pfizer wanted to select a molecule that was very safe which could reach high doses, without dose limiting hematologic toxicities, such as neutropenia or thrombocytopenia, said Gualberto.
Related current research is evaluating the association between diabetes and cancer. There is increasing prevalence of obesity and hyperinsulinemia globally, together with a secular trend for increasing IGF-I levels. This implies an increasing prevalence of factors that we now recognize increase cancer risk and worsen cancer prognosis, according to Pollak. High levels of insulin may stimulate tumour growth, said Pollak. Older, widely diabetes drugs like metformin are known to reduce both glucose and insulin levels and are under study to see whether they have any role to play in cancer treatment. Metformin acts through AMPK to attenuate insulin and IGF-I stimulated proliferation of cancer in certain preclinical models. “The intersection of diabetes and cancer is a very real thing.”
Dr Philip Cohen, a pioneer and world leader in the field of protein kinases, and director of research in the School of Life Sciences at University of Dundee, said “Current results with metformin and other similar compounds delayed the appearance of the tumour in mice models by several months. “These compounds are strongly protective against the onset of cancer, but they do not address the question of whether they have any effect on treating cancer,” he said. Scientists in Cohen’s research team identified the biochemical pathway by which insulin controls the metabolism of glucose. Dr Dario Alessi, a colleague at the University of Dundee, is working on establishing a potential link between cancer and diabetes, by characterising the functions of various protein kinase-signalling networks, including PDK1 and LKB1.
From Alessi’s research, data from patient records over ten years, have shown that patients on metformin reported a lower incidence of cancer. So far, patients on metformin showed anywhere between a 30-40% protection against all forms of cancer, over this period, said Cohen.
”Pfizer is one of the companies we work with. They will basically be the first to know about this result,” Cohen said. Patients on Pfizer’s current trials are given metformin when they develop hyperglycemia, said Pollak, and there is a lot of interest in the possibility that metformin may also help with anti-cancer activity. “Pfizer is keeping very careful notes,” Pollak added.
Cohen recommended that all companies should include metformin with their normal cancer drugs because they may actually enhance the efficacy of their drugs.
Dr Luis Paz-Ares, an investigator for Pfizer, and chief of the Division of Medical Oncology, Virgen del Rocio University Hospital in Seville, Spain, said Pfizer will be monitoring this issue closely, but metformin’s effect as an anti-cancer agent is still unclear. Although Pfizer’s compound induces hyperglycemia, there is currently no difference in patients who receive metformin in the company’s current NSCLC trials, he added.
The primary objective of the Phase III studies is to test the safety and clinical benefit of the addition of CP-751,871 to standard-of-care chemotherapy.
Dr Philip Rowlands, the development team leader for the CP-751,871 program in Pfizer Oncology, said the company will certainly look at all the data from the patients for other factors that may impact the drug’s risk-benefit profile, including any safety management practices that may be applied during the studies, including metformin treatment to manage hyperglycemia, but that these are not part of the primary endpoints of the study protocol.
Pfizer’s Phase III NSCLC trial is designed to determine if the company’s anti-IGF-I receptor antibody will enhance the benefit of chemotherapy for that disease, but it may also provide clues concerning any further effect of metformin, Pollak said.
--------------------------------------------------------------------------------------------------------
REVIEW & OUTLOOK SEPTEMBER 27, 2008 Re-Seeding the Housing Mess
Taxpayers are naturally suspicious that political insiders and contributors on Wall Street are going to make out like bandits once Washington starts spending the $700 billion in the financial market rescue. But Democrats have already decided to spin off potentially billions of taxpayer dollars from the bailout fund to their own political buddies -- not on Wall Street but on nearby K Street.
The House and Senate Democratic drafts contain an indefensible and well-hidden provision. It would mandate that at least 20% of any profit realized from the sale of each troubled asset purchased under the Paulson plan be deposited in either the Housing Trust Fund or the Capital Magnet Fund. Only after these funds get their cut of the profits are "all amounts remaining . . . paid into the Treasury for reduction of the public debt."
Here's the exact, amazing language from the Democratic proposal, breaking out how the money would be divided and dispensed:
"Deposits. Not less than 20% of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).
"Use of Deposits. 65% shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act . . . ; and 35% shall be deposited into the Capital Magnet Fund . . .
"Remainder Deposited in the Treasury. All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt."
What we have here essentially are a pair of government slush funds created in July as part of the Economic Recovery Act that pump tax dollars into the coffers of low-income housing advocacy groups, such as Acorn.
Acorn, one of America's most militant left-wing "community activist groups," is spending $16 million this year to register Democrats to vote in November. In the past several years, Acorn's voter registration programs have come under investigation in Ohio, Colorado, Michigan, Missouri and Washington, while several of their employees have been convicted of voter fraud.
Along with other potential recipients of these funds, including the National Council of La Raza and the Urban League, Acorn has promoted laws like the Community Reinvestment Act, which laid the foundation for the house of cards built out of subprime loans. Thus, we'd be funneling more cash to the groups that helped create the lending mess in the first place.
This isn't the first time this year that Democrats have tried to route money for fixing the housing crisis into the bank accounts of these community activist groups. The housing bill passed by Congress in July also included a tax on Fannie Mae and Freddie Mac to raise an estimated $600 million annually in grants for these lobbying groups. When Fannie and Freddie went under, the Democrats had to find a new way to fill the pipeline flowing tax dollars into the groups' coffers.
This is a crude power grab in a time of economic crisis. Congress should insist that every penny recaptured from the sale of distressed assets be dedicated to retiring the hundreds of billions of dollars in public debt that will be incurred, or passed back to taxpayers who will ultimately underwrite the cost of the bailout.
The idea that special-interest groups on the left or right should get a royalty payment for monies that are repaid to the Treasury is a violation of the public trust. We're told the White House and House Republicans are insisting that the Acorn fund be purged from the bailout bill. The Paulson plan is supposed to get us out of this problem, not start it over again.
Please add your comments to the Opinion Journal forum.
WSJ - Imclone continues negotiations to sell itself for ~$6.1B
ImClone Systems Inc. is expected to announce on Monday that it is continuing talks to sell itself to a major pharmaceutical concern for a price in the range of $6.1 billion, according to people familiar with the matter.
The biotech company, which last week rejected an unsolicited offer from Bristol-Myers Squibb Co. to acquire it for $5.4 billion, or $62 per share, is expected to announce a deadline by which it hopes to have a deal with its other suitor. The two sides remain in "deep discussions" and believe they can reach a resolution within days, the people said.
ImClone, best known for its Erbitux brand cancer drug, said previously that it expected its unnamed suitor to complete a review of its books by Sept. 28. ImClone has refused to identify the company it has been holding talks with but speculation has swirled around Pfizer Inc., which has declined to comment on the matter.
One person involved in the discussions said that more than one company had expressed interest in exploring a transaction with ImClone following Bristol's unsolicited July bid. These parties included both Pfizer and Eli Lilly & Co., the person said. Eli Lilly declined to comment.
Many observers view Bristol as the likely buyer for ImClone because it already owns roughly 17% of the company and holds the U.S. marketing rights for Erbitux.
Last week, Bristol increased its original $60 per share bid to $62 and hinted it was prepared to make its pursuit of ImClone hostile by pursuing the ouster of its board. ImClone Chairman Carl Icahn called the revised offer "absurd" and mocked Bristol Chairman and Chief Executive James M. Cornelius for making it.
"If you wish to make your attorneys wealthier, I can show you more productive ways to do so," Mr. Icahn wrote in an open letter. "Or, if you simply want publicity, I can also help you in that regard without your having to make unnecessary expenditures." The market continues to anticipate a higher offer than the one Bristol has put on the table. ImClone's shares closed on Friday at $63.38 per share.
—Shirley S. Wang contributed to this article.
Write to Matthew Karnitschnig at matthew.karnitschnig@wsj.com
by Ben Stein
Posted on Monday, September 22, 2008, 12:00AM
The headlines scream doom. There are endless references to the economic situation being "the worst since The Great Depression." Immense names in finance have collapsed and sunk beneath the waves of the financial crisis. Please allow me to try to explain a bit of what's going on.
First of all, all you have to do is look around you to see that in terms of daily life, we are not anywhere near The Great Depression. Unemployment is barely about six percent. It was 25 percent at the nadir of The Great Depression. Real per capita incomes adjusted for inflation are at least five times what they were during The Great Depression. Airplanes are full. High-end restaurants are full. Prices are painfully high for food. These are not signs of a Great Depression.
On the other hand, the losses in financial products have been devastating. The Dow is off 23 percent from its high in 2007. Financial stocks even after the recent rally are off staggeringly. The biggest insurer in America has become a basket case.
Most of all, there is REAL FEAR in the air. Decent, hard working people are terribly afraid as they see their life savings melt away. Retirement has become just a forlorn dream for tens of millions of Americans.
How did it happen?
Here s one big part of the answer. First, the alert reader will notice that Ben Stein said many times that the amount of money at risk in the subprime meltdown was just not enough to sink an economy of this size. And I was right...to a point. The amount of subprime that defaulted was at most - after recovery in liquidation - about $250 billion. A huge sum but not enough to torpedo the US economy.
The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.
The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)
These Credit Default Swaps have been written (as insurance is written) as private contracts. There is nil government regulation of them. Who writes these policies? Banks. Investment banks. Insurance companies. They now owe the buyers of these Credit Default Swaps on junk mortgage debt trillions of dollars. It is this liability that is the bottomless pit of liability for the financial institutions of America.
Because these giant financial companies never dreamed that the subprime mortgage securities could fall as far as they did, they did not enter a potential liability for these CDS policies anywhere near their true liability - which again, is virtually bottomless. They do not have a countervailing asset to pay off the liability.
This is what your humble servant, moi, missed. This is what all of the big investment banks and banks and insurance companies missed. This is what the federal government totally and utterly missed. This is what the truly brilliant speculators in these instruments did not miss. They could insure a liability they could also create and control. It is as if they could insure a Cadillac for its value upon theft - but they could control what the value the insurer had to pay off was. The insurer thought it might be fifty thousand dollars - but it was manipulated into being two million.
This is the whirlpool sucking down finance.
Now, we are about to have a similar phenomenon happen with commercial mortgage debt, debt from mergers and acquisitions, credit card debt, and car loan debt. Many trillions of dollars in Credit Default Swaps have been sold on all of this, and the prices of all of them have fallen and can be made to fall more.
As I said, the pit of loss is bottomless. Warren Buffett, the smartest man of all time in the world of finance, has called financial derivatives - of which Credit Default Swaps are a prime example - "weapons of financial mass destruction." And so they are. As with the hydrogen bomb, no one thought they would ever be used to end the world. But unless someone figures a way out - and maybe the new RTC is and maybe it isn't - we are in real peril. This should never have happened. Now that it did happen, should the taxpayer pay to make the billionaire speculators whole on their bets? What the heck is to be done?
The Icahn Report
Corporate Waste Brings this Nation Closer to the Brink
Posted: 19 Sep 2008 12:52 PM CDT
Few things bother me more than the titanic government debt load this country carries from years of reckless government borrowing and spending. We really have no ability to repay this debt, other than by continually issuing new debt to pay the interest on the old debt.
The Peter G. Peterson Foundation calculates that we as a country have racked up a staggering $53 trillion in government obligations. That’s $455,000 per household and growing at the rate of $2 trillion to $3 trillion a year "on autopilot," the respected think tank says.
Just this week, we added another $85 billion to these obligations with the bailout of insurance giant AIG. Add that to the $200 billion in potential obligations to Fannie Mae and Freddie Mac, the $29 billion to back up Bear Stearns toxic credits, and $300 billion for the Federal Housing Authority and a possible $25 billion to $50 billion in low-interest loans for Detroit’s Big-3 automakers and we’re talking nearly $700 billion on top of this.
The debt and obligations we carry as a nation, combined with our miniscule savings rate and monster trade deficit, is truly frightening.
But what is even worse is the sheer amount of waste in corporate America that impedes our ability to generate revenue needed to finance these obligations. Already many infrastructure projects across the nation are suffering from declining tax revenue.
America’s corporations need to be run more efficiently or tax revenues will continue to fall far short and we will be even more in hoc to foreign lenders. Inefficiency and mismanagement on a colossal scale is causing our corporations to lose their economic hegemony in the global marketplace every day. For the past 30 years, I have warned in countless articles and interviews that we as a country are losing our economic preeminence and my predictions are unfortunately becoming a reality.
I am not claiming to be another Jeremiah or Biblical prophet here, because you don’t need divine inspiration to ascertain this. But it is obvious that our diminishing economic state reflects poor corporate management in America. We have all the resources to succeed, so there is no reason why we should lose on the economic battlefield. The recent debacles on Wall Street only further erodes our economic clout in the world.
EBITDAT
The situation has gotten so egregious that we half-jokingly use a measure called EBITDAT when evaluating companies, i.e. earnings before interest, taxation, depreciation, amortization and theft. In my view, this theft is a measure of how much senior executives and boards of directors blithely take out of companies in lavish salaries, perks and benefits, even though they may be running their companies into the ground.
I have observed first-hand the sheer amount of waste and inefficiency at a few companies that I have taken over.
For instance, when I took over a rail freight car company called ACF during the 1980s, they had 12 floors in a Manhattan office building which was filled with workers. I couldn’t figure out what they did. I really tried to find out what these people did and even went so far as to pay $500,000 to a consultant to study the issue and get back to me. After weeks of research, even the consultant couldn’t figure it out. So I shut down the division and it had no discernable impact on the performance of the company, which I own to this day.
This experience, in my view, is emblematic of the extent of waste in corporate America. There are few companies that you can’t come in and cut 30 percent of operating costs and no one would know the difference.
I don’t fault salaries and perks for executives that perform – they make money for all shareholders. It’s the ones that are paid for failure that really make me mad.
Why, for instance, should Daniel Mudd, the outgoing CEO of Fannie Mae, be eligible for an exit package reportedly worth some $9.2 million after he presided over one of the worst financial debacles in American history, and one that could possibly cost taxpayers hundreds of billions of dollars?
The regulators who oversee Fannie Mae now say Mudd won’t be getting that exit package, but he still soaked up a rich salary in previous years. Last year, when Fannie was jumping heedlessly into risky Alt-A and subprime mortgages that caused its demise, Mudd earned $11.6 million.
This week we find out that Robert Willumstad, the CEO of collapsing insurance giant AIG, is eligible for an exit package worth over $8 million, according to an estimate quoted in New York Times.
This comes as AIG is brought to its knees by vast overexposure to credit default swaps to the tune of some $440 billion, virtually requiring the Feds to pony up a staggering $85 billion in loan guarantees in return for warrants for nearly 80 percent of its stock.
Will AIG ever repay this loan? Will taxpayers ever get a return on this investment? Given the 46 percent fall in AIG stock after the deal was announced, the markets are skeptical about any AIG rebound, at least in the near-term.
Examples of egregious pay-for-failure abound in corporate America these days as though management is playing a game called "loser-take-all," only the shareholders are the real losers and are often left with nothing.
Stan O'Neal recently left Merrill Lynch as CEO with a pay package of $160 million, while Charles Prince left Citigroup with a $40 million deal. The boards of these companies should have taken every legal means not to pay these egregious golden parachutes. At companies I have been involved with, including Blockbuster, I was able to significantly reduce this kind of egregious payment, even though prior boards has forged them.
Other boards must do the same and reverse this destructive trend.
CREDIT EXCESS
The collapse of Fannie, Freddie, Lehman, AIG, Merrill and IndyMac and over a dozen regional banks is emblematic of the era of credit excess on the part of banks and abdication of government oversight in lending standards.
What we’ve really seen over the last three or four years is greed gone wild and now we’re paying the price for it in a monster hangover.
The fact is, we could end up in a major recession or even a depression with all the reckless lending that banks have done over the last few years, thanks to low interest rates, overabundant liquidity, lax lending standards and the wholesale offloading of risk to who knows where.
Obviously, a major business downturn will have a huge impact on government tax revenues, so our national debt could balloon even more in the next few years. Over 80 percent of government spending is non-discretionary and tied up for pension obligations, Social Security, Medicare, etc. So there is really very little spending that can be cut from the budget.
And with the "baby boomers" starting to retire, these costs are just going to keep inexorably rising.
I have read about many financial crises, from the Holland tulip bulb crash to the Mississippi bubble to 1929 and I think John Galbraith he summed it up best.
"All crises have involved debt, which in some fashion or another becomes dangerously out of scale to the underlying means of payment," said Galbraith.
The engine of our economy is business, a vast portion of which is conducted at public companies. If we have any hope of balancing our budget and paying our obligations, the revenue will have to come from taxes on business earnings, wages and capital gains made by investors - all of which is contingent on the success of business.
We simply cannot afford to allow our businesses to be run by hobbyists who parade around with the trappings of success like country club memberships, fancy limos, corporate jets, 50-yard line seats, skyboxes, golf outings, fishing trips, etc, all at shareholder expense, and pretend that they do a job that they abjectly fail to achieve.
The evidence that board members and managers are failing is screaming at us from the front pages of every newspaper and the talking heads on every television show.
This must change - and change fast.
SEPTEMBER 18, 2008 Worst Crisis Since '30s, With No End Yet in Sight
By JON HILSENRATH, SERENA NG and DAMIAN PALETTAArticle
The financial crisis that began 13 months ago has entered a new, far more serious phase.
Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. The latest turmoil comes not so much from the original problem -- troubled subprime mortgages -- but from losses on credit-default swaps, the insurance contracts sold by American International Group Inc. and others to those seeking protection against other companies' defaulting.
Congressional Quarterly
Ranking member Spencer Bachus and Chairman Barney Frank during the House Financial Services hearing with Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation.
The consequences for companies and chief executives who tarry -- hoping for better times in which to raise capital, sell assets or acknowledge losses -- are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring intervention by the government that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.
Expectations for a quick end to the crisis are fading fast. "I think it's going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.
"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn't have during the Great Depression."
The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. Disease has overwhelmed the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied.
Fed Chairman Bernanke and Treasury Secretary Henry Paulson walked into the hastily arranged meeting with congressional leaders Tuesday night to brief them on the government's unprecedented rescue of AIG. They looked like exhausted surgeons delivering grim news to the family.
"These are huge, momentous events with cataclysmic implications," Sen. Chris Dodd, a Connecticut Democrat, said in an interview after the meeting.
More on the Crisis
Morgan Stanley in Talks With Wachovia, OthersComplete Coverage: Wall Street in CrisisFed and Treasury officials have identified the disease. It's called deleveraging. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can't pay back the loans, partly because of the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.
At least three things need to happen to bring the deleveraging process to an end, and they're hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.
But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets' prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms' share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a "financial accelerator."
"Many of the CEO types weren't willing...to take these losses, and say, 'I accept the fact that I'm selling these way below fundamental value,' " says Anil Kashyap, a University of Chicago business professor. "The ones that had the biggest exposure, they've all died."
Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.
Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down $408 billion worth of assets and raised $367 billion worth of capital.
But that doesn't appear to be enough. Every time financial firms and investors suggest that they've written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit $636 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 -- the equivalent of $250 billion in lost good in services each year.
"This is a deleveraging like nothing we've ever seen before," said Robert Glauber, now a professor of Harvard's government and law schools who came to the Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. "The S&L losses to the government were small compared to this."
Hedge funds could be among the next problem areas. Many rely on borrowed money, or leverage, to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many use borrowed money to invest in the funds and are finding it more difficult to borrow.
That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.
Debt-driven financial traumas have a long history, of course, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help -- and may have prevented or delayed a deep recession. But, at least in this instance, they don't suffice.
In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong's free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange traded fund and making money.
Today, Mr. Bernanke is taking out his playbook, said NYU economist Mr. Gertler, "and rewriting it as we go."
Merrill Lynch & Co.'s emergency sale to Bank of America Corp. last weekend was an example of the perniciousness and unpredictability of deleveraging. In the past year, Merrill has hired a new chief executive, written off $41.4 billion in assets and raised $21 billion in equity capital.
But Merrill couldn't keep up. The more it raised, the more it was forced to write off. When Merrill CEO John Thain attended a meeting with the New York Fed and other Wall Street executives last week, he saw that Merrill was the next most vulnerable brokerage firm. "We watched Bear and Lehman. We knew we could be next," said one Merrill executive. Fearful that its lenders would shut the firm off, he sold to Bank of America.
This crisis is complicated by innovative financial instruments that Wall Street created and distributed. They're making it harder for officials and Wall Street executives to know where the next set of risks are hiding and also spreading the fault lines of the crisis.
The latest trouble spot is an area called credit-default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall as market reassesses the risk that a company won't be able to honor its obligations. Firms use these instruments both as insurance -- to hedge their exposures to risk -- and to wager on the health of other companies. There are now credit-default swaps on more than $62 trillion in debt -- up from about $144 million a decade ago.
One of the big new players in the swaps game was AIG, the world's largest insurer and a major seller of credit-default swaps to financial institutions and companies. When the credit markets were booming, many firms bought this insurance from AIG, believing the insurance giant's strong credit ratings and large balance sheet could protect them from bond and loan defaults. AIG, which collected generous premiums for the swaps, believed the risk of default was low on many securities it insured.
As of June 30, an AIG unit had written credit-default swaps on more than $446 billion in credit assets, including mortgage securities, corporate loans and complex structured products. Last year, when rising subprime mortgage delinquencies damaged the value of many securities AIG had insured, the firm was forced to book large write-downs on its derivative positions. That spooked investors, who reacted by dumping its shares, making it harder for AIG to raise the capital it increasingly needed.
Credit default swaps "didn't cause the problem, but they certainly exacerbated the financial crisis," says Leslie Rahl, president of Capital Market Risk Advisors, a consulting firm in New York. The sheer volumes of outstanding CDS contracts -- and the fact that they trade directly between institutions, without centralized clearing -- intertwined the fates of many large banks and brokerages.
Few financial crises have been sorted out in modern times without massive government intervention. Increasingly, officials are coming to the conclusion that even more might be needed. A big problem: The Fed can and has provided short-term money to sound, but struggling, institutions that are out of favor. It can, and has, reduced the interest rates it influences to attempt to reduce borrowing costs through the economy and encourage investment and spending.
But it is ill-equipped to provide the capital that financial institutions now desperately need to shore up their finances and expand lending.
In normal times, capital-starved companies usually can raise capital on their own. In the current crisis, a number of big Wall Street firms, including Citigroup, have turned to sovereign wealth funds, the government-controlled pools of money.
But both on Wall Street and in Washington, there is increasing expectation that U.S. taxpayers will either take the bad assets off the hands of financial institutions so they can raise capital, or put taxpayer capital into the companies, as the Treasury has agreed to do with mortgage giants Fannie Mae and Freddie Mac.
One proposal was raised by Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. Rep. Frank advocated creating an analog to the Resolution Trust Corp., which took assets from failed banks and thrifts and found buyers over several years.
"When you have a big loss in the marketplace, there are only three people that can take the loss -- the bondholders, the shareholders and the government," said William Seidman, who led the RTC from 1989 to 1991. "That's the dance we're seeing right now. Are we going to shove this loss into the hands of the taxpayers?"
The RTC seemed controversial and ambitious at the time. Any analog today would be even more complex. The RTC dispensed mostly of commercial real estate. Today's troubled assets are complex debt securities -- many of which include pieces of other instruments, which in turn include pieces of yet others, many steps removed from the actual mortgages or consumer loans on which they're based. Unraveling these strands will be tedious and getting at the underlying collateral, difficult.
In the early stages of this crisis, regulators saw that their rules didn't fit the rapidly changing financial system they were asked to oversee. Investment banks, at the core of the crisis, weren't as closely monitored by the Securities and Exchange Commission as commercial banks were by their regulators.
The government has a system to close failed banks, created after the Great Depression in part to avoid sudden runs by depositors. Now, runs happen in spheres regulators barely understand, such as the repurchase agreement, or repo, market, in which investment banks fund their day-to-day operations. And regulators have no process for handling the failure of an investment bank like Lehman. Insurers like AIG aren't even federally regulated.
Regulators have all but promised that more banks will fail in the coming months. The Federal Deposit Insurance Corp. is drawing up a plan to raise the premiums it charges banks so that it can rebuild the fund it uses to back deposits. Examiners are tightening their leash on banks across the country.
One pleasant mystery is why the financial crisis hasn't hit the economy harder -- at least so far. "This financial crisis hasn't yet translated into fewer...companies starting up, less research and development, less marketing," Ivan Seidenberg, chief executive of Verizon Communications, said Wednesday. "We haven't seen that yet. I'm sure every company is keeping their eyes on it."
At 6.1%, the unemployment rate remains well below the peak of 7.8% in 1992, amid the S&L crisis.
In part, that's because government has reacted aggressively. The Fed's classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn't repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.
In part, the broader economy has held mostly steady because exports have been so strong at just the right moment, a reminder the global economy's importance to the U.S. And in part, it's because the U.S. economy is demonstrating impressive resilience, as information technology allows executives to react more quickly to emerging problems and -- to the discomfort of workers -- companies are quicker to adjust wages, hiring and work hours when the economy softens.
But the risk remains that Wall Street's woes will spread to Main Street, as credit tightens for consumers and business. Already, U.S. auto makers have been forced to tighten the terms on their leasing programs, or abandon writing leases themselves altogether, because of problems in their finance units. Goldman Sachs economists' optimistic scenario is a couple years of mild recession or painfully slow economy growth.
—Aaron Lucchetti, Mark Whitehouse, Gregory Zuckerman and Sudeep Reddy contributed to this article.Write to Jon Hilsenrath at jon.hilsenrath@wsj.com, Serena Ng at serena.ng@wsj.com and Damian Paletta at damian.pale
New Survey on Erbitux in First-Line mCRC:
#msg-32189875.
IMCL reports mixed results in CRYSTAL study:
#msg-32189729.
If You Like Michigan's Economy, You'll Love Obama's
By PHIL GRAMM and MIKE SOLON
September 13, 2008; Page A13
Despite the federal government's growing economic dominance, individual states still exercise substantial freedom in pursuing their own economic fortune -- or misfortune. As a result, the states provide a laboratory for testing various policies.
In this election year, the experience of the states gives us some ability to look at the economic policies of the two presidential candidates in action. If a program is not playing in Peoria, it probably won't work elsewhere. Americans have voted with their feet by moving to states with greater opportunities, but federal adoption of failed state programs would take away our ability to walk away from bad government.
Growth in jobs, income and population are proof that a state is prospering. But figuring out why one state does well while another struggles requires in-depth analysis. In an effort to explain differences in performance, think tanks have generated state-based economic freedom indices modeled on the World Economic Freedom Index published by The Wall Street Journal and the Heritage Foundation.
The Competitiveness Index created by the American Legislative Exchange Council (ALEC) identifies "16 policy variables that have a proven impact on the migration of capital -- both investment capital and human capital -- into and out of states." Its analysis shows that "generally speaking, states that spend less, especially on income transfer programs, and states that tax less, particularly on productive activities such as working or investing, experience higher growth rates than states that tax and spend more."
Ranking states by domestic migration, per-capita income growth and employment growth, ALEC found that from 1996 through 2006, Texas, Florida and Arizona were the three most successful states. Illinois, Ohio and Michigan were the three least successful.
The rewards for success were huge. Texas gained 1.7 million net new jobs, Florida gained 1.4 million and Arizona gained 600,000. While the U.S. average job growth percentage was 9.9%, Texas, Florida and Arizona had job growth of 18.5%, 21.4% and 28.9%, respectively.
Remarkably, a third of all the jobs in the U.S. in the last 10 years were created in these three states. While the population of the three highest-performing states grew twice as fast as the national average, per-capita real income still grew by $6,563 or 21.4% in Texas, Florida and Arizona. That's a $26,252 increase for a typical family of four.
By comparison, Illinois gained only 122,000 jobs, Ohio lost 62,900 and Michigan lost 318,000. Population growth in Michigan, Ohio and Illinois was only 4.2%, a third the national average, and real income per capita rose by only $3,466, just 58% of the national average. Workers in the three least successful states had to contend with a quarter-million fewer jobs rather than taking their pick of the 3.7 million new jobs that were available in the three fastest-growing states.
In Michigan, the average family of four had to make ends meet without an extra $8,672 had their state matched the real income growth of the three most successful states. Families in Michigan, Ohio and Illinois struggled not because they didn't work hard enough, long enough or smart enough. They struggled because too many of their elected leaders represented special interests rather than their interests.
What explains this relative performance over the last 10 years? The simple answer is that governance, taxes and regulatory policy matter. The playing field among the states was not flat. Business conditions were better in the successful states than in the lagging ones. Capital and labor gravitated to where the burdens were smaller and the opportunities greater.
It costs state taxpayers far less to succeed than to fail. In the three most successful states, state spending averaged $5,519 per capita. In the three least successful states, state spending averaged $6,484 per capita. Per capita taxes were $7,063 versus $8,342.
There also appears to be a clear difference between union interests and the worker interests. Texas, Florida and Arizona are right-to-work states, while Michigan, Ohio and Illinois are not. Michigan, Ohio and Illinois impose significantly higher minimum wages than Texas, Florida and Arizona. Yet with all the proclaimed benefits of unionism and higher minimum wages, Texas, Florida and Arizona workers saw their real income grow more than twice as fast as workers in Michigan, Ohio and Illinois.
Incredibly, the business climate in Michigan is now so unfavorable that it has overwhelmed the considerable comparative advantage in auto production that Michigan spent a century building up. No one should let Michigan politicians blame their problems solely on the decline of the U.S. auto industry. Yes, Michigan lost 83,000 auto manufacturing jobs during the past decade and a half, but more than 91,000 new auto manufacturing jobs sprung up in Alabama, Tennessee, Kentucky, Georgia, North Carolina, South Carolina, Virginia and Texas.
So what do the state laboratories tell us about the potential success of the economic programs presented by Barack Obama and John McCain?
Mr. McCain will lower taxes. Mr. Obama will raise them, especially on small businesses. To understand why, you need to know something about the "infamous" top 1% of income tax filers: In order to avoid high corporate tax rates and the double taxation of dividends, small business owners have increasingly filed as individuals rather than corporations. When Democrats talk about soaking the rich, it isn't the Rockefellers they're talking about; it's the companies where most Americans work. Three out of four individual income tax filers in the top 1% are, in fact, small businesses.
In the name of taxing the rich, Mr. Obama would raise the marginal tax rates to over 50% on millions of small businesses that provide 75% of all new jobs in America. Investors and corporations will also pay higher taxes under the Obama program, but, as the Michigan-Ohio-Illinois experience painfully demonstrates, workers ultimately pay for higher taxes in lower wages and fewer jobs.
Mr. Obama would spend all the savings from walking out of Iraq to expand the government. Mr. McCain would reserve all the savings from our success in Iraq to shrink the deficit, as part of a credible and internally consistent program to balance the budget by the end of his first term. Mr. Obama's program offers no hope, or even a promise, of ever achieving a balanced budget.
Mr. Obama would stimulate the economy by increasing federal spending. Mr. McCain would stimulate the economy by cutting the corporate tax rate. Mr. Obama would expand unionism by denying workers the right to a secret ballot on the decision to form a union, and would dramatically increase the minimum wage. Mr. Obama would also expand the role of government in the economy, and stop reforms in areas like tort abuse.
The states have already tested the McCain and Obama programs, and the results are clear. We now face a national choice to determine if everything that has failed the families of Michigan, Ohio and Illinois will be imposed on a grander scale across the nation. In an appropriate twist of fate, Michigan and Ohio, the two states that have suffered the most from the policies that Mr. Obama proposes, have it within their power not only to reverse their own misfortunes but to spare the nation from a similar fate.
////////////////////////////////////////////////////////////////
article 2
How Not to Balance a Budget
WSJ Editorial
September 13, 2008; Page A12
Anyone who thinks the path to "fiscal discipline" is through higher taxes ought to look at the current budget spectacles in New York and California. The two liberal states have among the highest tax burdens in the country, yet both now find themselves with huge budget deficits and are debating still higher taxes to close the gap.
California has the highest state income tax rate in the country (10.3%), while New York State also has a high income tax rate (6.85%), with the combined state and city rate rising to 10.5% in New York City. Their overall government spending totals also happen to top the national charts. And, what do you know, California is $15 billion in the red this year while New York is trying to close a $6.4 billion 2009 budget hole, which budget expert E.J. McMahon of the Manhattan Institute expects to grow to $26 billion over three years.
California hasn't even passed a budget yet, many weeks into the fiscal year. The Democrats in Sacramento have proposed a series of new taxes on businesses and individuals with incomes above $1 million. Their plan would raise the top income tax rate to 12%, which would be the highest in the nation. They would also repeal a tax law allowing businesses to carry forward losses against future profits.
In August, Governor Arnold Schwarzenegger abandoned his promise not to raise taxes and proposed a hike in the sales tax -- by one percentage point for three years, which would bring the rate in many cities to as high as 9%. California taxpayers are fortunate that state law requires a two-thirds majority to pass a budget, which gives Republicans in the legislature leverage to block these tax hikes. They realize that these budget showdowns are the only chance they have to force even modest spending restraint.
A similar mess is playing out in Albany, where Assembly Democrats and Republicans have passed a budget with two added tax rates. Millionaires would face a one-percentage-point rate income tax hike (to 11.5% in New York City), while anyone making more than $5 million would get hit with another 0.85-point hike (to 12.35% in NYC). A new business tax of 4% would also apply to hedge fund managers.
The politicians who want all these new taxes are the same ones who scratch their heads and wonder why so many hedge funds are already based in Connecticut, or why Manhattan is losing its status as financial capital of the world. So far the only voice of reason has been Democratic Governor David Paterson, who has attacked the tax increase and wants spending cuts first.
Mr. Paterson knows what he's talking about, as New York State spending has climbed by 45% in the last five years, according to the Manhattan Institute. As for California, its spending soared to $145 billion in 2008 from $104 billion in 2004. Every time the politicians raise taxes, they merely lift their spending by as much or more, and then plead poverty and demand another tax hike during the next economic slowdown.
The "progressives" who dominate politics in these states target the rich on grounds that they have the ability to pay. They also have the ability to leave. From 1997-2006, New York State lost 409,000 people (not counting foreign immigrants). For every two people who move into the state, three flee. Maybe the problem for New York is merely bad weather, not high taxes.
Except that sunny California is experiencing a similar exodus. Over the past decade 1.32 million more native-born Americans left the Golden State than moved in -- despite beaches, mountains and 70-degree weather. Mostly the people who have fled are the successful, the talented and the rich.
If taxes don't matter, then maybe someone can explain the divergent economic paths of California and New York and America's two other most populous states, Florida and Texas. The latter two states have no personal income tax. Personal income has been growing about 50% faster in Florida and Texas than in California and New York. (See chart.) This year Texas became the No. 1 state for Fortune 500 corporate headquarters. About a dozen of those 58 corporations once called New York or California home, and taxes are one reason they departed.
We realize that none of this will matter to the Sacramento and Albany politicians, whose only priority is taking ever more money from the private economy to feed their patronage interests. But perhaps it will serve as a lesson to other states that haven't yet embarked on this tax-and-spend road to red ink and slower growth.
We Fought Cancer…And Cancer Won.
After billions spent on research and decades of hit-or-miss treatments, it's time to rethink the war on cancer.
Sharon Begley
NEWSWEEK
Updated: 1:55 PM ET Sep 6, 2008
There is a blueprint for writing about cancer, one that calls for an uplifting account of, say, a woman whose breast tumor was detected early by one of the mammograms she faithfully had and who remains alive and cancer-free decades later, or the story of a man whose cancer was eradicated by one of the new rock-star therapies that precisely target a molecule that spurs the growth of malignant cells. It invokes Lance Armstrong, who was diagnosed with testicular cancer in 1996 and, after surgery and chemotherapy beat it back, went on to seven straight victories in the Tour de France. It describes how scientists wrestled childhood leukemia into near submission, turning it from a disease that killed 75 percent of the children it struck in the 1970s to one that 73 percent survive today.
But we are going to tell you instead about Robert Mayberry. In 2002 a routine physical found a lesion on his lung, which turned out to be cancer. Surgeons removed the malignancy, which had not spread, and told Mayberry he was cured. "That's how it works with lung cancer," says oncologist Edward Kim of the University of Texas M. D. Anderson Cancer Center in Houston, who treated Mayberry. "We take it out and say, 'You're all set, enjoy the rest of your life,' because really, what else can we do until it comes back?" Two years later it did. The cancerous cells in Mayberry's lung had metastasized to his brain—either after the surgery, since such operations rarely excise every single microscopic cancer cell, or long before, since in some cancers rogue cells break away from the primary tumor as soon as it forms and make their insidious way to distant organs. It's impossible to know. Radiation therapy shrank but did not eliminate the brain tumors. "With that level of metastasis," says Kim, "it's not about cure. It's about just controlling the disease." When new tumors showed up in Mayberry's bones, Kim prescribed Tarceva, one of the new targeted therapies that block a molecule called epidermal growth factor receptor (EGFR) that acts like the antenna from hell: it grabs growth-promoting signals out of the goop surrounding a cancer cell and uses them to stimulate proliferation. Within six months—it was now the autumn of 2005—the tumors receded, and Mayberry, who had been unable to walk when the cancer infiltrated his brainstem and bones, was playing golf again. "I have no idea why Tarceva worked on him," says Kim. "We've given the same drug to patients in the same boat, and had no luck." But the luck ran out. The cancer came back, spreading to Mayberry's bones and liver. He lost his battle last summer.
We tell you about Mayberry because his case sheds light on why cancer is on track to kill 565,650 people in the United States this year—more than 1,500 a day, equivalent to three jumbo jets crashing and killing everyone aboard 365 days a year. First, it shows the disconnect between the bench and the bedside, between what science has discovered about cancer and how doctors treat it. Biologists have known for at least two decades that it is the rare cancer that can be completely cured through surgery. Nevertheless, countless proud surgeons keep assuring countless anxious patients that they "got it all." In Mayberry's case, says Kim, "my gut feeling is that [cells from the original lung tumor] were smoldering in other places the whole time, at levels so low not even a whole-body scan would have revealed them." Yet after surgery and, for some cancers, radiation or chemotherapy, patients are still sent back into the world with no regimen to keep those smoldering cells from igniting into a full-blown metastatic cancer or recurrence of the original cancer. Mayberry's story also shows the limits of "targeted" cancer drugs such as Tarceva, products of the golden age of cancer genetics and molecular biology. As scientists have learned in just the few years since the drugs' introduction, cancer cells are like brilliant military tacticians: when their original route to proliferation and invasion is blocked, they switch to an alternate, marching cruelly through the body without resistance.
We also tell you about Mayberry because of something Boston oncologist (and cancer survivor) Therese Mulvey told us. She has seen real progress in her 19 years in practice, but the upbeat focus on cancer survivors, cancer breakthroughs and miracle drugs bothers her. "The metaphor of fighting cancer implies the possibility of winning," she said after seeing the last of that day's patients one afternoon. "But some people are just not going to be cured. We've made tremendous strides against some cancers, but on others we're stuck, and even our successes buy some people only a little more time before they die of cancer anyway." She pauses, musing on how the uplifting stories and statistics—death rates from female breast cancer have fallen steadily since 1990; fecal occult blood testing and colonoscopy have helped avert some 80,000 deaths from colorectal cancer since 1990—can send the wrong message. "With cancer," says Mulvey, "sometimes death is not optional."
Yet it was supposed to be. In 1971 President Richard Nixon declared war on cancer (though he never used that phrase) in his State of the Union speech, and signed the National Cancer Act to make the "conquest of cancer a national crusade." It was a bold goal, and without it we would have made even less progress. But the scientists and physicians whom Nixon sent into battle have come up short. Rather than being cured, cancer is poised to surpass cardiovascular disease and become America's leading killer. With a new administration taking office in January, and with the new group Stand Up to Cancer raising $100 million (and counting) through its telethon on ABC, CBS and NBC on Sept. 5, there is no better time to rethink the nation's war on cancer.
In 2008, cancer will take the lives of about 230,000 more Americans—69 percent more—than it did in 1971. Of course, since the population is older and 50 percent larger, that raw number is misleading. A fairer way to examine progress is to look at age-adjusted rates. Those statistics are hardly more encouraging. In 1975, the first year for which the National Cancer Institute has solid age-adjusted data, 199 of every 100,000 Americans died of cancer. That rate, mercifully, topped out at 215 in 1991. In 2005 the mortality rate fell to 184 per 100,000, seemingly a real improvement over 1975. But history provides some perspective. Between 1950 and 1967, age-adjusted death rates from cancer in women also fell, from 120 to 109 per 100,000, found an analysis by the American Cancer Society just after Nixon's speech. In percentage terms, the nation made more progress in keeping women, at least, from dying of cancer in those 17 years, when cancer research was little more than a cottage industry propelled by hunches and trial-and-error treatment, as it did in the 30 years starting in 1975, an era of phenomenal advances in molecular biology and genetics. Four decades into the war on cancer, conquest is not on the horizon. As a somber statement on the NCI Web site says, "the biology of the more than 100 types of cancers has proven far more complex than imagined at that time." Oncologists resort to a gallows-humor explanation: "One tumor," says Otis Brawley of the ACS, "is smarter than 100 brilliant cancer scientists."
The meager progress has not been for lack of trying. Since 1971, the federal government, private foundations and companies have spent roughly $200 billion on the quest for cures. That money has bought us an estimated 1.5 million scientific papers, containing an extraordinary amount of knowledge about the basic biology of cancer. It has also brought real progress on a number of fronts, not least the invention of drugs for nausea, bowel problems and other side effects of the disease or treatment. "These have reduced suffering and changed people's ability to live with cancer," says Mulvey. In fact, just a few months after Nixon's call to arms, Bernard Fisher of the University of Pittsburgh began studies that would show that a woman with breast cancer has just as good a chance of survival if she receives a mastectomy rather than have her breast, chest-wall muscles and underarm tissue cut out, the standard at the time. The new approach spared millions of women pain and disfigurement. In 1985, treatment improved again when Fisher showed that lumpectomy followed by radiation to kill lingering cells was just as effective for many women as mastectomy. It wasn't a cure, but it mattered. "One can wait for the home run," says Fisher, now 90, "but sometimes you get runs by hitting singles and doubles. We haven't hit a home run yet; we can't completely prevent or completely cure breast cancer."
Nixon didn't issue his call to arms in order to reduce disfigurement, however. The goal was "to find a cure for cancer." And on that score, there are some bright spots. From 1975 to 2005, death rates from breast cancer fell from 31 to 24 per 100,000 people, due to earlier detection as well as more-effective treatment. Mortality from colorectal cancer fell from 28 to 17 per 100,000 people, due to better chemotherapy and, even more, to screening: when colonoscopy finds precancerous polyps, they can be snipped out before they become malignant.
But progress has been wildly uneven. The death rate from lung cancer rose from 43 to 53 per 100,000 people from 1975 to 2005. The death rate from melanoma rose nearly 30 percent. Liver and bile-duct cancer? The death rate has almost doubled, from 2.8 to 5.3 per 100,000. Pancreatic cancer? Up from 10.7 to 10.8. Perhaps the most sobering statistic has nothing to do with cancer, but with the nation's leading killer, cardiovascular disease. Thanks to a decline in smoking, better ways to control hypertension and cholesterol and better acute care, its age-adjusted mortality has fallen 70 percent in the same period when the overall mortality rate from cancer has fallen 7.5 percent. No wonder cancer "is commonly viewed as, at best, minimally controlled by modern medicine, especially when compared with other major diseases," wrote Harold Varmus, former director of NCI and now president of Memorial Sloan-Kettering Cancer Center in New York, in 2006.
About all scientists knew about cancer 50 years ago was that cancer cells make copies of their DNA and then of themselves more rapidly than most normal cells do. In the 1940s, Sidney Farber, a Boston oncologist, intuited that since cells need a biochemical called folate to synthesize new DNA, an anti-folate might impede this synthesis. After a friend at a chemical company synthesized an anti-folate—it was named methotrexate—Farber gave it to cancer patients, sending some into short-term remission, he reported in 1948. (Two years earlier, scientists had serendipitously discovered that mustard gas, a chemical weapon, could reduce tumors in patients with non-Hodgkin's lymphoma, but no one had any idea how it worked.) Thus was born the era of chemotherapy, one that continues today. It is still based on the simple notion that disrupting DNA replication and cell division will halt cancer. Soon there would be dozens of chemo drugs that target one or more of the steps leading to cell proliferation. Almost all of those approved in the 1970s, 1980s and 1990s were the intellectual descendants of Farber's strategy of stopping cancer cells from making copies of their DNA, and then themselves, by throwing a biochemical wrench into any of the steps involved in those processes. And none of it had anything to do with understanding why cancer cells were demons of proliferation. "The clinical-research community was expending enormous effort mixing and matching chemotherapy drugs," recalls Dennis Slamon, who began a fellowship in oncology at UCLA in 1979 and is now director of clinical/translational research at the Jonsson Cancer Center there. "There was nothing coming out of the basic science that could help" patients.
In the high-powered labs funded by the war on cancer, molecular biologists thought they could change that. By discovering how genetic and other changes let cancer cells multiply like frisky rabbits, they reasoned, they could find ways to stop the revved-up replication at its source. That promised to be more effective, and easier on healthy cells than chemotherapy drugs, which also kill normal dividing cells, notably in the gut, bone marrow, mouth and hair follicles. In the 1970s, cancer scientists discovered cancer viruses that alter DNA in animals, and for a while the idea that viruses cause cancer in people, too, was all the rage. (The human papilloma virus causes cervical cancer, but other human cancers have nothing to do with viruses, it would turn out.) In the 1970s and 1980s they discovered human genes that, when mutated, trigger or promote cancer, as well as tumor suppressor genes that, when healthy, do as their name implies but when damaged release the brakes on pathways leading to cancer.
It made for a lot of elegant science and important research papers. But it "all seemed to have little or no impact on the methods used by clinicians to diagnose and treat cancers," wrote Varmus. Basic-science studies of the mechanisms leading to cancer and efforts to control cancer, he observed, "often seemed to inhabit separate worlds." Indeed, it is possible (and common) for cancer researchers to achieve extraordinary acclaim and success, measured by grants, awards, professorships and papers in leading journals, without ever helping a single patient gain a single extra day of life. There is no pressure within science to make that happen. It is no coincidence that the ratio of useful therapy per basic discovery is abysmal. For other diseases, about 20 percent of new compounds arising from basic biological discoveries are eventually approved as new drugs by the FDA. For cancer, only 8 percent are.
A widely discussed 2004 article in Fortune magazine ("Why We're Losing the War on Cancer") laid the blame for this at the little pawed feet of lab mice and rats, and indeed there is a lot to criticize about animal studies. The basic approach, beginning in the 1970s, was to grow human cancer cells in a lab dish, transplant them into a mouse whose immune system had been tweaked to not reject them, throw experimental drugs at them and see what happened. Unfortunately, few of the successes in mice are relevant to people. "Animals don't reflect the reality of cancer in humans," says Fran Visco, who was diagnosed with breast cancer in 1987 and four years later founded the National Breast Cancer Coalition, an advocacy group. "We cure cancer in animals all the time, but not in people." Even scientists who have used animal models to make signal contributions to cancer treatment agree. "Far more than anything else," says Robert Weinberg of MIT, the lack of good animal models "has become the rate-limiting step in cancer research."
For this story, NEWSWEEK combed through three decades of high-profile successes in mice for clues to why the mice lived and the people died. Two examples make the point. Scientists were tremendously excited when Weinberg and colleagues discovered the first cancer-causing gene (called ras) in humans, in 1982. It seemed obvious that preventing ras from functioning should roll back cancer. In this decade, scientists therefore began testing drugs, called FTIs, that do exactly that. When FTIs were tested on human cancers that had been implanted into mice, they beat back the cancer. But in people, the drugs failed. One reason, scientists suspect, is that the transplanted cancers came from tumors that had been growing in lab dishes for years, long enough to accumulate countless malignant genes in addition to ras. Disabling ras but leaving those other mutations free to stoke proliferation was like using a sniper to pick off one soldier in an invading platoon: the rest of the platoon marches on. That general principle—not even the malignancy in a single cancer has one cause—would haunt cancer research and treatment for years. A compound called TNF, for tumor necrosis factor, raised hopes in the 1980s that it would live up to its name. When it was injected into mice carrying human tumors, it seemed to melt them away. But in clinical trials, it had little effect on the cancer. "Animal models have not been very predictive of how well drugs would do in people," says oncologist Paul Bunn, who leads the International Society for the Study of Lung Cancer. "We put a human tumor under the mouse's skin, and that microenvironment doesn't reflect a person's—the blood vessels, inflammatory cells or cells of the immune system," all of which affect prognosis and survival.
If mouse models have a single Achilles' heel, it is that the human tumors that scientists transplant into them, and then attack with their weapon du jour, almost never metastasize. Even in the 1970s there was clear evidence—in people—of the deadly role played by cells that break off from the original tumor: women given chemo to mop up any invisible malignant cells left behind after breast surgery survived longer without the cancer's showing up in their bones or other organs, and longer, period, than women who did not receive such "adjuvant" therapy, scientists reported in 1975. "Every study of adjuvant therapy shows it works because it kills metastatic cells even when it appears the tumor is only in the breast or in the first level of lymph nodes," says the ACS's Brawley. By the mid-1990s studies had shown similar results for colon cancer: even when surgeons said they'd "got it all," patients who received chemo lived longer and their cancer did not return for more years.
Yet for years, despite the clear threat posed by metastatic cells, which we now know are responsible for 90 percent of all cancer deaths, the war on cancer ignored them. Scientists continued to rely on animal models where metastasis didn't even occur. Throughout the 1980s and 1990s, says Visco, "researchers drilled down deeper and deeper into the disease," looking for ever-more-detailed molecular mechanisms behind the initiation of cancer, "instead of looking up and asking really big questions, like why cancer metastasizes, which might help patients sooner."
There was another way. At the same time that molecular biologists were taking the glamorous, "look for the cool molecular pathway," cojones-fueled approach to seeking a cure, pediatric oncologists took a different path. Pediatric cancer had long been a death sentence: in Farber's day, children with leukemia rarely survived more than three months. (President Bush's sister Robin died of the disease in 1953; she was 3.) Fast-forward to 2008: 80 percent of children with cancer survive well into adulthood.
To achieve that success, pediatric oncologists collaborated to such a degree that at times 80 percent of the children with a particular cancer were enrolled in a clinical trial testing a new therapy. In adults, it has long been less than 1 percent. The researchers focused hardly at all on discovering new molecular pathways and new drugs. Instead, they threw everything into the existing medicine chest at the problem, tinkering with drug doses and combinations and sequencing and timing. "We were learning how to better use the drugs we had," says pediatric oncologist Lisa Diller of Dana-Farber Cancer Institute and Children's Hospital Boston. By 1994, combinations of four drugs kept 75 percent of childhood leukemia patients—and 95 percent of those enrolled in a study—cancer-free. Childhood brain cancer has been harder to tame, but while 10 percent of kids survived it in the 1970s, today 45 percent do—a greater improvement than in most adult cancers. (To be sure, some scientists who work on adult cancers are sick of hearing about the noble cooperation of their pediatric colleagues. Childhood cancers, especially leukemias, are simpler cancers, they say, often characterized by a single mutation, and that's why the cure rate has soared. Neutral observers say it's a little of both: pediatric-cancer scientists really did approach the problem in a novel, practical way, but their enemy is less wily than most adult cancers.)
Biologists who never met a signaling pathway they didn't love tend to dismiss the success in pediatric oncology. It involved no discoveries of elegant cell biology, just plodding work. Ironically, however, it is these "singles," not the grand slams of molecular biology, that have made the greatest difference in whether people develop cancer and die of it. Fewer smokers (54 percent of men smoked in 1971; 21 percent do today), more women having mammograms and fewer taking hormone-replacement therapy (the incidence of breast cancer fell an unheard-of 7 percent from 2002 to 2003, after a 2002 study found that HRT can stimulate the growth of tiny breast tumors) have had at least as great an impact on cancer as the achievements of basic-science labs that received the bulk of the funding in the war on cancer. Similarly, the widespread use of Pap smears to detect precancerous changes in cells of the cervix is almost entirely responsible for the drop in both incidence of and deaths from cervical cancer. Incidence has fallen some 65 percent since 1975, and mortality at least 60 percent. Little wonder, then, that by the 1980s critics were asking why the war on cancer was spending the vast majority of taxpayers' money on elegant biology that cured millions of mice rather than on the search for more practical advances like these.
By "critics," we don't mean disgruntled laypeople. At UCLA, Denny Slamon had been inspired by Robert Weinberg's discovery of the first human oncogene, ras, in 1982. Although drugs to squelch the gene directly did not pan out, the discovery did lead to the first real success of the reductionist, "let's get in there and study the genetics and molecules of cancer" approach. Slamon was at first following the crowd, examining animal cancers for signs of DNA changes. But in 1982 he had an idea: look for unusual genes in tissue samples taken from human tumors. He applied to NCI for funding and, he recalls, "they basically sent it back with a laugh track. They said it was just a fishing expedition, that it wasn't hypothesis-driven. We tried to explain the logic—that if cancer reflects a problem of genetic control, then finding mutated genes should be important—but still didn't get funded." The same year that NCI laughed at Slamon's idea, MIT's Weinberg and colleagues discovered another gene involved in cancer. Called HER2, it makes a molecule that sits on the outside of cells and acts like an antenna, picking up growth signals that are then carried to the cell nucleus, where they deliver a simple if insidious message: go forth and multiply, really really fast. That made Slamon wonder whether HER2 might play a role in major human cancers.
In 1984, backed by private funding, Slamon found that 27 percent of breast cancers contain extra copies of HER2. Over the next decade he and other scientists showed that HER2 caused the cancer, rather than being an innocent bystander (or "marker," as scientists say). They also found an antibody that attaches to HER2 like a squirrel's nest on a TV antenna, preventing it from picking up signals. In 1998 the FDA approved that antibody, called Herceptin, for use in breast cancers fueled by HER2. It was stunning proof of the principle that drugs could be precisely crafted to cripple molecules that lie upstream of cell replication, stoking the growth of cancer cells and only cancer cells, not healthy ones, and has cured thousands of women. After the 1984 discovery, NCI was happy to fund Slamon. "It was only because we had already shown that the research would work," he says wistfully. "It is, shall we say, a conservative way to spend your money."
Slamon was not the only scientist who noticed NCI's preference for elegant molecular studies over research that offered the possibility of new treatments. (We should note that funding decisions are made not by NCI bureaucrats but by panels of scientists from, mostly, universities and medical institutions.) In the mid-1990s Brain Druker of the Oregon Health and Science University Cancer Institute wanted to study a molecule involved in chronic myelogenous leukemia. Targeting that molecule, he thought, might cure CML. "People rolled their eyes and asked, 'What's new and different about this?' " By "new and different," they meant scientifically novel, elegant, offering new insight into a basic cellular process. He didn't even apply for an NCI grant. "I knew I'd just be wasting my time," he says. "NCI would have looked at what I wanted to do and said it was too high-risk. Instead I took the tried-and-true approach of getting funded for basic research, seeing how cell growth is regulated" by molecules that are grabbed by receptors on a leukemia cell and that send proliferation orders to the cell nucleus. This work led to a useful clinical test, but the work NCI did not fund (a private foundation did) eventually led to Gleevec, the blockbuster CML drug.
Indeed, there is no more common refrain among critics of how the war on cancer has been waged: that innovative ideas, ideas that might be grand slams but carry the risk of striking out, are rejected by NCI in favor of projects that promise singles. "We ask the scientists all the time why aren't we further along," says Visco. "Part of the answer is that the infrastructure of cancer is to keep things moving along as they have been and to reward people doing safe research. Exciting new ideas haven't fared well." As coincidence would have it, in the very year that Nixon launched the war on cancer, an unknown biologist named Judah Folkman published a paper proposing that metastatic cells survive, and become deadly, only if they grow blood vessels to keep themselves supplied with nutrients. That process is called angiogenesis, and it had nothing to do with the genes and proteins that the soldiers in the war on cancer were fixated on. Throughout the 1970s "the reaction was mainly hostility and ridicule," Folkman (who died earlier this year) recalled to NEWSWEEK in 1998. "People would ask me [at scientific meetings], 'You really don't believe that, do you?' " NCI turned down his request for funds to continue his work, calling his ideas about the importance of angiogenesis in metastasis "just your imagination," Folkman said. He persisted, of course, laying the groundwork for what would become anti angiogenesis drugs. Avastin was approved for colorectal cancer in 2004.
If the 1990s were the era of identifying cellular processes and molecules unique to cancer cells—not the blunderbuss approach of wrecking DNA and stopping replication, which brings friendly fire down on healthy cells—the focus of the 2000s is to personalize treatment. The reason is that, just as cancer cells develop resistance to standard chemo drugs, so they are finding ways to elude the new targeted drugs such as Avastin, Gleevec and Herceptin. In the studies that led the FDA to approve Avastin, for instance, the drug prolonged life in patients with advanced colorectal cancer by a median of four months. In later studies, it increased survival in advanced lung-cancer patients by a couple of months, says Roy Herbst, a lung oncologist at M. D. Anderson. Why so little? "Angiogenesis is a redundant process," Herbst explains. "Most cells use the VEGF pathway [that Avastin blocks], but there are at least 12 other pathways, and Avastin doesn't block any of them." With VEGF out of commission, malignant cells turn to these alternatives. Or consider Tarceva, given to lung-cancer patients, which turns off a molecule called EGFR that fuels the proliferation of some lung and other cancer cells. "It shrinks the tumor 60 to 80 percent of the time, and the effect lasts about a year," says David Johnson, a thoracic oncologist at Vanderbilt (University) Ingram Cancer Center. But if even a tiny fraction of malignant cells in the tumor or at metastatic sites use a proliferation pathway other than EGFR, they laugh off Tarceva and proliferate unchecked; most patients are dead within three years. Of the first patients with a rare gastric cancer whom George Demetri of Dana-Farber treated with Gleevec in 2000, 85 percent became resistant to it after five years. (Before Gleevec, though, patients with this cancer died within six weeks.) The malignant cells, it turns out, change the shape of the molecule that Gleevec blocks. It's as if a teenager, knowing Mom has a key to his room and wanting his privacy, changed the lock before she arrived.
In response to the limits of targeted therapies, scientists are pursuing the next big idea: that there is no such thing as cancer. There are only cancers, plural, each one characterized by a different set of mutations, a different arsenal it uses to fight off drugs and proliferate. "By the time there are 10 cancer cells, you probably have eight different cancers," says Demetri. "There are different pathways in each of the cells." And that's why cancer patients keep dying. One woman found a lump in her breast in 2002, nine months after a mammogram had shown nothing amiss. She had the breast tumor removed, says oncologist Julie Gralow, who treated her at the Fred Hutchinson Cancer Center, and chemotherapy to kill any remaining malignant cells. The woman did well for three years, but in 2005 an exam found cancer in her bones. She underwent half a dozen different chemotherapies over the next three years, until last March the cancer was detected in her brain. She received radiation—because chemo drugs generally do not cross the blood-brain barrier, radiation rather than chemo is the treatment of choice for brain cancer—but by July tumors had riddled her body. She died that month.
To beat down cancer mortality, oncologists need to target all the many cancers that make up a cancer—the dozens of different pathways that cells use to proliferate and spread. That is the leading edge of research today, determining how this patient's tumor cells work and hitting those pathways with multiple drugs, simultaneously or sequentially, each chosen because it targets one of those growth, replication and angiogenesis pathways. "The hope is to match tumor type to drug," says Roy Herbst. "We need to make the next leap, getting the right drug to the right patient."
Both presidential candidates have vowed to support cancer research, which makes this a propitious time to consider the missed opportunities of the first 37 years of the war on cancer. Surely the greatest is prevention. Nixon never used the word; he exhorted scientists only to find a cure. Partly as a result, the huge majority of funding for cancer has gone into the search for ways to eradicate malignant cells rather than to keep normal cells from becoming malignant in the first place. "The funding people are interested in the magic-bullet research because that's what brings the dollars in," says oncologist Anthony Back, of the Hutch. "It's not as sexy to look at whether broccoli sprouts prevent colon cancer. A reviewer looks at that and asks, 'How would you ever get that to work?' " And besides, broccoli can't be patented, so without the potential payoff of a billion-dollar drug there is less incentive to discover how cancer can be prevented.
Another missed opportunity involves the environment around a tumor cell. "We used to focus on cancer cells with the idea that they were master of their own destiny," says MIT's Weinberg. "By studying genes inside the cell we thought we could understand what was going on. But now [we know] that many tumors are governed by the signals they receive from outside"—from inflammatory cells, cells of the immune system and others. "It's the interaction of signals inside and outside the tumor that creates aggressiveness and metastasis."
Which leads to the third big missed opportunity, the use of natural compounds and nondrug interventions such as stress reduction to keep the microenvironment inhospitable to cancer. (Cancer cells have receptors that grab stress hormones out of the bloodstream and use them to increase angiogenesis.) "Funding has gone to easier areas to research, like whether a drug can prevent cancer recurrence," says Lorenzo Cohen, who runs the integrative care center at M. D. Anderson. That's simpler to study, he points out, than whether a complicated mix of diet, exercise and stress reduction techniques can keep the micro-environment hostile to cancer. And while we're on the subject of how to reduce mortality from cancer, consider these numbers: 7 percent of black women with breast cancer get no treatment, 35 percent do not receive radiation after mastectomy (the standard of care), and 26 percent of white women do not. As long as scientists are discovering how to thwart cancer, it might make sense to get the advances into the real world.
Breakthroughs continue to pour out of labs, of course. Cutting-edge techniques are allowing scientists to identify promising experimental drugs more quickly than ever before. And just last week separate groups of scientists announced that they had identified dozens of genes involved in glioblastoma, the most common brain cancer, as well as pancreatic cancer. That raises the possibility that the mutations cause the cancer, and that if the pathways they control can be blocked the cancer can be beaten back. Stop us if you've heard that before. Hope springs eternal that such findings will not join the long list of those that are interesting but irrelevant to patients.
The right way to look at IMC-11F8 (IMO):
#msg-32138427.
Surveys on the mystery bidder:
#msg-32084757
#msg-32084850
IMCL gets $70 offer from another pharma
Not BMY
MR Icahn.."the gadfly billionaire" ..
gad·fly
n.
1. A persistent irritating critic; a nuisance.
2. One that acts as a provocative stimulus; a goad.
3. Any of various flies, especially of the family Tabanidae, that bite or annoy livestock and other animals.
Convergence or conflict?
Aug 28th 2008 | NEW YORK
From The Economist print edition
Drug giants’ recent attempts to buy big biotech firms have provoked a backlash
Illustration by Claudio Munoz
DALLIANCES between conventional pharmaceutical companies and biotechnology firms are nothing new. Big Pharma, eager to refill its emptying drug pipelines, has in recent years looked hopefully to biotech’s upstarts. The drugs giants have pursued all sorts of tie-ups, from alliances to licensing deals to outright purchases of a few smallish companies. But mindful of the sharp cultural differences between the two sorts of firms, they have generally avoided big acquisitions.
Until now, that is. In recent weeks Roche, a Swiss pharmaceuticals giant, has made a surprise $44 billion bid for the 44% of Genentech, the world’s biggest biotech firm by stockmarket value, that it does not already own; and Bristol-Myers Squibb (BMS), an American drugs company, has offered $4.5 billion for the 83% of ImClone, an American biotech firm, that it does not already control. These attempts came on the heels of earlier deals in which AstraZeneca, a British drugs giant, bought MedImmune for $15.6 billion, and Takeda of Japan paid $8.8 billion for Millennium.
This frenzy of mergers has been a rare bright spot for investment bankers of late. By one estimate, America saw $60 billion in biotech deals in 2007 and Europe $34 billion. Roger Longman of Windhover, an industry consultancy, notes that the total value of biotech acquisitions by pharmaceutical companies has risen dramatically in the past couple of years (see chart).
What explains the spate of big deals? The familiar underlying problem is that Big Pharma is cash-rich but innovation-poor, so it has resorted to buying in bright ideas while it tries to overhaul its business model. Even so, the industry’s new push to acquire large and rather pricey biotech stars is surprising. And the deals seen so far are just the beginning, forecasts Steven Burrill, an industry expert who thinks “the biotech-product ‘land grab’ by Big Pharma” will soon reach “fever pitch”.
Corporate aphrodisiacs
One relatively new factor fuelling the frenzy is regulatory risk. After a series of safety scandals involving Merck’s Vioxx, GlaxoSmithKline’s Avandia and other problem pills, America’s Food and Drug Administration is now decidedly risk-averse. Gobbling up big biotech firms with proven drugs in the marketplace, rather than cheaper but more speculative start-ups, gets around the difficulties of winning regulatory approval for a new drug.
Another motivation may be the looming patent-expiry crisis confronting many big drugs companies. As big blockbusters such as Pfizer’s Lipitor go off patent, the industry is about to lose tens of billions of dollars in revenues to generics manufacturers. Biotech drugs provide something of a hedge against this coming calamity, for two reasons. First, they are much harder to copy, so generic equivalents (called “biosimilars”) will be slow in coming. Second, big countries including America do not yet have final regulations set up for approving those copycat drugs, thus bolstering the position of the biotech innovators.
The drugs giants also have piles of cash. Although they have shovelled billions of dollars back to shareholders, in the form of share buybacks and generous dividends, they have not succeeded in buying the love of Wall Street, which remains gloomy about the industry’s capacity to innovate and worries about possible price-controls on pills. So drugs firms may now have decided to redirect that money into giant acquisitions that could jump-start their innovation machines.
Finally, the weak dollar has made it cheaper for foreigners to take over American firms. Many of today’s acquirers are from outside America, but most of the targets are based in the traditional biotech clusters of California and Massachusetts.
Alas for Big Pharma, its courtship of biotech has not been met with open arms. As often happens in May-to-December romances, even a well-financed suitor can encounter resistance from the youthful object of desire. The bosses of both Genentech and ImClone have unceremoniously rejected the offers made by their partners. Some suggest that this is mere posturing, designed to fetch a higher sale price. But there is good reason to think that the fight put up by biotech bosses also has a powerful cultural dimension, too. Many detest Big Pharma, and are convinced that selling out to bureaucratic marketing machines will destroy the heart and soul of their smaller, more agile firms.
Consider Genentech, long viewed as the world’s most successful biotechnology firm. Its independent-minded boffins have flourished under the company’s famously laid-back approach to research and development. They developed Avastin, a breakthrough monoclonal antibody that already earns $4 billion a year as a cancer fighter, and is on track to become the world’s most lucrative drug by 2014. Roche has long recognised the value of that culture, and has wisely remained an arm’s length partner to avoid infecting Genentech with its corporate ways.
But the Swiss giant has suddenly changed tack. Why? Trials now under way may, it is said, show Avastin to be a useful treatment for earlier stages of colon cancer than the stages it targets today. If those results, which may emerge in the next few months, are indeed positive, then the drug could be worth many billions of dollars more in annual revenue. So Roche may be trying to grab Avastin on the cheap by swooping before those results come out.
The tussle over ImClone has been an altogether messier affair, thanks to Carl Icahn, a legendary corporate raider who owns a stake and is chairman of the firm. Its main product is Erbitux, a cancer drug jointly marketed with BMS that brings in $1.3 billion a year in sales. Rather than selling the entire company to BMS, Mr Icahn wants it split into two bits: one containing Erbitux and the other inheriting ImClone’s future drug-pipeline. He claims BMS used its insider knowledge about his proposal for a split (BMS has its own man on ImClone’s board) to make a pre-emptive bid, so it could buy the firm at a cheaper price. He says a break-up would enhance the firm’s total value. BMS rejects his allegations and insists ImClone would be most valuable if fully integrated into BMS—a notion that sends shivers down the spines of pharma-haters in the biotech camp.
To see how difficult it can be even for Mr Icahn to get his way, look to the saga at Biogen Idec, another American biotech firm in which the gadfly billionaire owns a stake. He is convinced that the firm would be much more valuable as part of a drugs giant rather than an independent firm. So he pushed it to find a buyer. Biogen Idec’s bosses resisted at first, but in the face of lawsuits, boardroom manoeuvring and acrimonious attacks they relented—or so it seemed. Biogen Idec put itself up for sale last year, but the recalcitrant management found clever ways to make the bidding process so onerous and unattractive that nobody made a bid for it.
So will Big Pharma’s land-grab succeed, heralding the long-awaited convergence of the two industries? Given how wealthy and desperate the drugs giants are, some deals are inevitable. But many biotech bosses will not give up without a fight.
Back to top ^^
Randomized Phase 2 Study of IMC-A12 and IMC-1121B for Advanced Prostate Cancer Commences Patient Enrollment
Tuesday August 26, 7:00 am ET
NEW YORK--(BUSINESS WIRE)--ImClone Systems Incorporated (NASDAQ: IMCL - News), a global leader in the development and commercialization of novel antibodies to treat cancer, today announced that its disease-directed Phase 2 clinical trial in patients with advanced prostate cancer randomized to treatment with either IMC-A12 or IMC-1121B plus mitoxantrone and prednisone has commenced patient enrollment. IMC-A12 and IMC-1121B are two therapeutic candidates in ImClone’s proprietary receptor-targeted antibody pipeline. IMC-A12 is ImClone’s fully human, IgG1 anti-insulin-like growth factor-1 receptor (IGF-1R) monoclonal antibody and IMC-1121B is its fully human, IgG1 anti-vascular growth factor receptor-2 (VEGFR-2) monoclonal antibody.
This multicenter, randomized open-label Phase 2 single-arm study is enrolling patients with metastatic androgen-independent prostate cancer who have developed disease progression during or within 60 days of receiving docetaxel-based chemotherapy or demonstrated intolerance to docetaxel-based therapy. A total of 132 patients are expected to be enrolled at various centers, including those that participate in the Department of Defense’s Prostate Cancer Consortium. This Phase 2 study is designed to evaluate the efficacy and safety of both IMC-A12 and IMC-1121B combined with mitoxantrone and prednisone. IMC-A12 and IMC-1121B are administered weekly, whereas mitoxantrone is administered every three weeks with oral daily prednisone.
etc.
http://biz.yahoo.com/bw/080826/20080826005489.html?.v=1
Dueling Visions
By JIM MCTAGUE
John McCain's and Barack Obama's tax plans hold vastly different implications for the U.S. economy. Required reading before you vote.
WITH HOUSING IN A DEPRESSION, FINANCIAL COMPANIES in crisis, stocks slumping and a recession gathering or under way, you'd think that Wall Street would have a strong opinion about whether John McCain or Barack Obama is better-suited to steer the ship of state away from the rocks. But interviews with dozens of money managers, economists and industry analysts over the past few months indicate that, while most would be more comfortable with the Republican candidate, the vast majority don't think that either man would affect the economy much differently than the other.
The vast majority, however, is wrong.
In McCain and Obama, the electorate is presented with dueling visions of what shape the economy, and particularly the nation's tax structure, should take. Obama's stated belief is that the best way to revitalize America is by raising taxes on the rich and redistributing wealth to the poor and middle class. McCain, in contrast, would retain all of President Bush's tax cuts, including those for the wealthy, and cut corporate taxes markedly, with the aim of boosting investment in businesses and creating jobs.
Whichever concept prevails will have profound implications for the economy over the next decade. And, if Obama's plan prevails, it could well be for the worse. While both candidates' proposals have their pros and cons, Obama's appears to have a few too many cons. There's no question about that if you happen to be in the top 1% of income-tax payers. According to the nonpartisan Tax Policy Center, the Obama plan would boost the average tax bill for that group by $93,709, to $652,890. McCain's plan would reduce that group's average by $48,862 to $510,319.
But far more is at stake than the size of any single fat cat's tax bill. With adjusted gross incomes totaling $2 trillion, or $1.6 million per capita, the top 1% of taxpayers account for more than 20% of all adjusted gross income. And these folks tend to plow a lot of their money into businesses -- from family operations to blue-chip stocks -- to say nothing of shopping trips and travel. In other words, cutting their after-tax income could deal another blow to an already-hobbled economy.
The problem would only be compounded by Obama's stand on capital-gains and dividends taxes -- he'd hike them both. He also would institute a more onerous estate tax than McCain would.
It's almost as if Obama wants to repeat the mistakes of Herbert Hoover. During the Great Depression, Hoover raised the top marginal rate to 63% from 25% and hiked corporate taxes, too, says Michael Aronstein, chief investment strategist at Oscar Gruss & Son in New York. The moves siphoned needed investment capital out of the markets and into the hands of bureaucrats, delaying the turnaround.
Of course, taxes aren't the only part of Obama's and McCain's economic programs, and the economy isn't the only issue in the election. Barron's, in highlighting the weaknesses of Obama's tax plans, is not taking a position on his entire candidacy, or on McCain's. It is Barron's policy not to endorse candidates. We do, however, see taxes as a crucial issue for the economy and markets, and Obama's positions have troubling implications. With the Democratic convention starting this week, it's not too late for him to change.
SO FAR, WALL STREET has reacted to Obama with relative warmth. He's attracted such advisers as Warren Buffett and former Fed chief Paul Volcker. And many seasoned observers maintain that the Democrat's economic policies are quite similar to those of his Republican rival. "There are attempts to make the Obama-McCain difference big; but they are not that big, really," avers Martin Barnes, the managing editor of the Bank Credit Analyst.
Because of the budget deficit, now approaching $500 billion a year, the next president, regardless of party, will have his hands tied, many observers say. He will have little choice but to raise taxes and cut spending.
Obama's tax plans, however, point to a philosophy that historically has worried market pros. Raising taxes on the investor class simply doesn't help investment.
That lesson evidently was lost during the Clinton administration, which promoted tax policies similar to Obama's. Democrats argue that Clinton proved that higher taxes can go hand-in-hand with stronger growth. The U.S. added 2.8 million jobs annually in the Clinton years, and markets soared. The S&P 500 stock index, with reinvested dividends, rose 256% during Clinton's two terms, handily topping the 178% gain for tax-cutting icon Ronald Reagan, according to data from Bianco Research. Better still, the federal budget deficit under Clinton turned into a $236 billion surplus. Consequently, the total returns on bonds, measured by the Lehman Aggregate Index, rose 73%.
There's a good case to be made, however, that if Clinton had been given a free hand, he would have hurt the economy and the markets. Critics maintain that he was saved from himself by a string of fortuitous events, including the GOP taking control of the House in 1994.
If Obama wins, there will be no credible opposition to his tax plans. In fact, he might well enjoy the largest Democratic majority in Congress since 1937, with his party likely to pick up seats in the House and Senate as the Republicans suffer from a "throw the bums out" backlash against the Bush years.
Obama's team, for its part, insists that the tax proposals would be a boon to the economy. Obama adviser Lawrence Summers, who was Clinton's Treasury secretary, argues: "At a time when the 10-year interest rate is in the threes, at a time when it is clearly lack of demand for products rather than the cost of capital that is inhibiting investment, the idea that a return to the tax policies of the 1990s would somehow damage the economy in a substantial way seems to me supported by neither theory nor evidence nor the longer-term history."
But leverage is dead for the moment, so those low rates are not as alluring as they once were. And Summers assumes that raising someone's tax bill by multiple thousands will not curb their investment activities. That assumption is dubious at best.
The reductions of tax bills under President Bush certainly helped the economy. They spurred consumption, investment and entrepreneurial activity. Without the cuts, GDP growth would have been 0.7% less each year from 2001 through 2006, and the unemployment rate would have been 1.2 percentage points higher over the period, according to an analysis prepared for the American Council for Capital Formation by independent economist Allen Sinai.
IT'S HARD TO PIN down the details of Obama's tax proposal because they keep changing. Follow the bouncing tax rates. Until this month, he said he would raise taxes on only those making $250,000 or more, hiking the marginal rate from 35% to 39.6%, exactly where it was when Clinton was president. He said that he'd raise capital gains and dividend taxes, now 15%, to 20%, where they stood before 2003, and possibly as high as 28%, where they were when Ronald Reagan was president. Obama also promises to apply a Social Security tax on this cohort of 2% to 4%.
This month, however, Jason Furman and Austan Goolsbee, his top economic advisers, wrote in a Wall Street Journal op-ed piece that Obama would raise taxes on individuals making $200,000 or more. Their top marginal rate would go from 33% to 36%. Asked about this apparent change, the Obama campaign declined to provide an explanation.
Obama's tax plan, at least in the original version, would generate $131 billion a year in new revenue for the government, according to the Tax Policy Center, a joint operation of the Brookings Institution and the Urban Institute in Washington. His proposal to make the wealthiest taxpayers pay higher Social Security taxes than everyone else could net Uncle Sam another $40 billion a year. He's recently had second thoughts about this proposal and said that he might delay its implementation to 2018, way beyond his term.
Over all, he would raise $800 billion more over 10 years than the government would if the Bush tax cuts were made permanent, according to the Tax Policy Center. McCain's plan, which keeps all the Bush cuts and trims corporate taxes to 25% from 35%, would cut revenue by $600 billion.
Obama would use the money he takes from the wealthy to keep rates low for everyone else and to fund universal health care (estimated cost: $55 billion a year when up and running). For the nation's poorest households, there also would be benefits for child care, mortgage interest and education. He wants to make amends for a Bush expansion that saw incomes rise at the top while real incomes slid for the middle and lower classes, owing to higher fuel and food costs.
Cognizant that his tax hikes might retard job growth, Obama plans a zero capital-gains rate for small businesses and start-ups -- details to come later. But that might not be broad enough to offset the damage of his tax hikes.
Wachovia's chief economist, John Silvia, says corporate and capital-gains tax hikes would crimp the flow of foreign capital to the U.S. and slow growth and job creation relative to the rest of the world: "If foreign investors perceive that our tax rates are going to go up over time, they are not going to invest as much in this country as they otherwise would. And this is bad not only for Wall Street but for Main Street."
MCCAIN'S TAX PLAN is more growth-oriented than Obama's because it punishes no one group and, by lowering corporate tax rates, makes U.S. businesses more attractive to American and foreign investors. Workers with corporate health benefits would be pinched by McCain's proposal to end tax exclusions for that coverage and replace it with a tax credit of $2,500 for individuals and $5,000 for families. If you wanted a more expensive policy, then you would have to shell out additional dollars for it. But that's part of a health-care reform proposal aimed at bringing down medical costs by making consumers more savvy shoppers, not a revenue-raising scheme.
McCain's tax plan, which includes a reduction in the alternative minimum tax, is lacking in progressivity and thus, like the Bush cuts, would benefit the top brackets the most. According to the Tax Policy Center, McCain would cut taxes for 60% of households -- but less than one in five households in the bottom fifth and less than half of those in the next-to-last fifth would see a reduction in their IRS bills.
McCain promises that his fiscal plan will lower deficits, not raise them, because he will be austere on the spending side of the ledger. Whether he'd succeed at that is open to question, but he does have a lengthy track record of opposing pork-barrel projects and has been known to take on special interests. It's as if he's been paying penance these past 20 years for his association with S&L rogue Charles Keating back in the 1980s. McCain was one of the Keating Five -- five senators accused of improperly helping Keating fight regulators.
His mantra on the campaign trail is that he will veto wasteful spending and make the authors of such bills "famous," meaning infamous. And since he is a Republican -- though more in the vein of centrist Nelson Rockefeller than conservative Reagan -- he would have an easier time than would Obama in bucking a Democratic Congress.
Nevertheless, plenty of Wall Streeters see no threat to the economy from Obama. Investors like unconventional economic approaches when conventional ones seem to be failing, says Tom Gallagher, an analyst with ISI Group in Washington. Gallagher also notes that in three previous contests where a Democrat won a close contest, there was a selloff after Labor Day, followed by a pre-election rally. He expects this pattern to be repeated if Obama is the frontrunner going into the fall.
The last of those Democrats to win, Bill Clinton, went on to defy the tax-hike worrywarts -- with some help from Lady Luck. Not only did a GOP Congress hold his tax and spending plans in check, but a loose-fisted Fed also brought interest rates to rock-bottom levels and pumped $40 billion into the economy on the eve of Y2K.
Obama could get lucky, just like Clinton. Oil prices could fall to $50 a barrel, or a Tom Edison might turn crab grass into jet fuel. Better yet, Obama, who's no dummy, might think twice about raising taxes during the worst financial crisis in 78 years.
--------------------------------------------------------------------------------
E-mail: jim.mctague@barrons.com
Survey: Oncologists Show Support for Erbitux Uptake Based on KRAS Test
The Pink Sheet Daily. 2008 Aug 18, J Merrill
KRAS testing of metastatic colorectal cancer patients could encourage earlier use of ImClone/Bristol-Myers Squibb's Erbitux (cetuximab) in patients with wild type KRAS tumors, suggest the results of a survey of 50 oncologists specializing in the disease.
The KRAS test recently emerged as a way to evaluate which patients are more likely to respond to treatment with epidermal growth factor receptor inhibitors like Erbitux and Amgen's Vectibix (panitumumab).
In a retrospective analysis of data from the CRYSTAL trial presented at the American Society of Clinical Oncology in June, colorectal cancer patients whose tumors contain the wild type KRAS gene responded better to treatment with Erbitux plus chemotherapy than did patients with tumor KRAS mutations. Other studies have also demonstrated the role of KRAS in response to EGFR therapy.
As data on KRAS has emerged so has speculation about what the impact of gene testing and personalized treatment could be on clinical practice. Rodman & Renshaw conducted a survey of oncologists to assess future prospects of Erbitux both in metastatic colorectal cancer and in non-small cell lung cancer - in light of Bristol's bid to buyout Imclone - and released the results Aug. 13.
The investment research firm surveyed 50 leading oncologists, 25 in NSCLC and 25 in CRC, both in academia and in clinical practice, asking them about current treatment practices and future trends. The surveyed docs treat about 4,000 patients in a year.
Oncologists favored Avastin over Erbitux, but just slightly
In the metastatic CRC setting, when asked about their preference for front line treatment of patients with the wild type KRAS gene, the oncologists still favored Genentech's Avastin (bevacizumab) over Erbitux, but only by a small margin (50 percent versus 45.8 percent).
"In our view, this clearly points to increasing acceptance of Erbitux as a viable alternative to Avastin and front-line and second-line mCRC setting in KRAS wild type patients," analyst Michael King said in an accompanying report. "These attitudes are positive for Imclone, and show an unmistakable trend that KRAS testing may actually help Erbitux gain market share."
In the metastatic CRC setting only about 16 percent of patients treated by the surveyed oncologists now receive Erbitux in the first line, with the drug far more frequently used in the second line (68 percent). Erbitux is indicated for CRC in patients whose cancer has progressed after chemotherapy or who are intolerant to chemotherapy.
Avastinwas by far the favored biologic in the front line setting, but was used less frequently than Erbitux in the second line (44 percent versus 68 percent).
About 60 percent of colorectal cancer patients are KRAS wild type, while the other 40 percent have the KRAS mutation, and would be unlikely to respond to EGFR therapy.
When questioned about the role of KRAS testing in treating the disease, a majority of oncologists surveyed (60 percent) said they are incorporating KRAS testing into their clinical practice, while all respondents said they expect KRAS testing will play a "major role" in the management of metastatic CRC.
As diagnostic tests and personalized medicines emerge, however, uptake has been limited, and many questions remain over how payors will cover such tests. Oncologists surveyed by Rodman & Renshaw indicated those challenges will be sorted out.
"We believe physicians are fairly confident that they will not be facing reimbursement hurdles," King wrote. The average doctors expect to pay is about $400 per test.
Extraction, KRAS specimen prep, could pose problem for physicians
Still, of those physicians surveyed, 79 percent were unfamiliar with the technique of preparing KRAS tissue specimens, and 76 percent said they lacked the services of a pathologist for specimen extraction. So establishing KRAS testing in clinical practice could still have a ways to go.
Nonetheless, King expects Erbitux will have a "major impact" on treatment of metastatic CRC in the first and second line in 2009. He increased his estimates of Erbitux market penetration in fiscal 2009 for front line treatment from his current projection of 7 percent to 10 percent; and in the second line setting from 19.3 percent to 25 percent. Those models exclude the impact of KRAS testing.
In addition to the KRAS data from CRYSTAL, Bristol/ImClone also are seeking to expand labeling based on positive results of the Phase III FLEX study, presented at ASCO, showing an overall survival benefit for Erbitux in first line non-small cell lung cancer patients.
An indication in NSCLC could be worth $10.54 to each ImClone share, King speculated.
Bristol announced a bid to acquire the remaining 83 percent of ImClone it does not already own July 31 for $60 per share, or $4.5 billion, a 30 percent premium over the closing price of the stock July 30. ImClone's board of directors has indicated it feels the bid undervalues the firm.
Copyright © FDC Reports
Subscribe Now »
I agree with your misgivings. Spinning off an ImClone clone to develop the pipeline could create the same kind of underfinanced, hanging by a thread, company that ImClone was for all those years, which would slow down the development of the science. It should all be kept together both for the financing and marketing synergies as well as to leverage knowledge about related products.
There is a way to split off the pipeline, at least conceptually. BMY could offer a fixed price, like $60 for IMCL shares plus a contingent right tied to the performance of the pipeline. This right could be structured as a series of flat payments or as a percentage of the early revenues from pipeline drugs. It could also be made a tradeable security, so that if an IMCL holder wants to exit the stock completely that would be possible.
Other bidders could do the same, but the rights could take on different values because of the patent unclarity.
It's a complex and maybe annoying solution, but we have seen much the same thing before. Where? --In BMY's first equity deal with IMCL, which included a fixed price plus milestone payments.
imc a12
1 Recruiting Study Using IMC-A12 With or Without Cetuximab in Patients With Metastatic Colorectal Cancer Who Have Failed a Treatment Regimen That Consisted of a Prior Anti-EGFr Therapy
Condition: Colorectal Cancer
Interventions: Drug: IMC-A12; Drug: IMC-A12 + cetuximab
2 Recruiting Study of IMC-A12, Alone or in Combination With Cetuximab, in Patients With Recurrent or Metastatic Squamous Cell Carcinoma (MSCC) of the Head and Neck
Condition: Head and Neck Cancer
Intervention: Biological: IMC-A12
3 Recruiting A Five-Tier, Phase 2 Open-Label Study of IMC-A12 Administered as a Single Agent
Conditions: Ewing's Sarcoma /Peripheral Neuroectodermal Tumor (PNET); Rhabdomyosarcoma; Leiomyosarcoma; Adipocytic Sarcoma; Synovial Sarcoma
Intervention: Biological: IMC-A12
4 Recruiting Study Using IMC-A12 or IMC-1121B Plus Mitoxantrone and Prednisone in Metastatic Androgen-Independent Prostate Cancer, Following Disease Progression on Docetaxel-Based Chemotherapy
Condition: Metastatic Androgen-Independent Prostate Cancer
Intervention: Drug: IMC-1121B and IMC-A12
5 Recruiting IMC-A12 in Combination With Temsirolimus (CCI-779) in Patients With Advanced Cancers
Conditions: Advanced Cancers; Metastatic Cancer
Interventions: Drug: IMC-A12; Drug: Temsirolimus
6 Recruiting Monoclonal Antibody IMC-A12 and Temsirolimus in Treating Patients With Locally Advanced or Metastatic Cancer
Conditions: Chronic Myeloproliferative Disorders; Leukemia; Lymphoma; Multiple Myeloma and Plasma Cell Neoplasm; Myelodysplastic Syndromes; Myelodysplastic/Myeloproliferative Diseases; Precancerous/Nonmalignant Condition; Unspecified Adult Solid Tumor, Protocol Specific
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Drug: temsirolimus
7 Not yet recruiting IMC-A12 and Temsirolimus in Treating Patients With Locally Recurrent or Metastatic Breast Cancer
Condition: Breast Cancer
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Drug: temsirolimus; Procedure: fluorescence in situ hybridization; Procedure: gene expression analysis; Procedure: immunohistochemistry staining method; Procedure: laboratory biomarker analysis; Procedure: mutation analysis; Procedure: pharmacological study; Procedure: proteomic profiling; Procedure: reverse transcriptase-polymerase chain reaction; Procedure: western blotting
8 Recruiting Monoclonal Antibody IMC-A12 and Doxorubicin in Treating Patients With Unresectable, Locally Advanced, or Metastatic Soft Tissue Sarcoma
Conditions: Adult Malignant Fibrous Histiocytoma of Bone; Sarcoma
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Drug: doxorubicin hydrochloride
9 Recruiting IMC-A12 in Treating Patients With Advanced Liver Cancer
Condition: Liver Cancer
Intervention: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12
10 Recruiting IMC-A12 in Treating Young Patients With Relapsed or Refractory Ewing Sarcoma/Peripheral Primitive Neuroectodermal Tumor or Other Solid Tumor
Conditions: Sarcoma; Unspecified Childhood Solid Tumor, Protocol Specific
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Procedure: pharmacological study; Procedure: protein expression analysis; Procedure: western blotting
11 Completed Study With IMC-A12 in Patients Who Have Not Previously Been Treated With Chemotherapy With Metastatic Prostate Cancer
Condition: Adenocarcinoma of the Prostate
Intervention: Drug: IMC-A12
12 Recruiting A Study for Safety and Effectiveness of IMCA12 by Itself or Combined With Antiestrogens to Treat Metastatic Breast Cancer in Patients Who Progressed on Antiestrogen Therapy
Condition: Metastatic Breast Cancer
Intervention: Biological: IMC-A12
13 Recruiting Gemcitabine and Erlotinib With or Without Monoclonal Antibody Therapy in Treating Patients With Metastatic Pancreatic Cancer That Cannot Be Removed By Surgery
Condition: Pancreatic Cancer
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Drug: erlotinib hydrochloride; Drug: gemcitabine hydrochloride
14 Not yet recruiting Capecitabine and Lapatinib With or Without Monoclonal Antibody Therapy in Treating Patients With Previously Treated HER2-Positive Stage IIIB, Stage IIIC, or Stage IV Breast Cancer
Condition: Breast Cancer
Interventions: Drug: anti-IGF-1R recombinant monoclonal antibody IMC-A12; Drug: capecitabine; Drug: lapatinib ditosylate
imc 1121b
1 Recruiting A Study of IMC-1121B in Combination With Paclitaxel and Carboplatin as First-Line Therapy in Stage IIIB/IV Non-Small Cell Lung Cancer
Condition: Non Small Cell Lung Cancer
Intervention: Biological: IMC-1121B
2 Recruiting Study Using IMC-A12 or IMC-1121B Plus Mitoxantrone and Prednisone in Metastatic Androgen-Independent Prostate Cancer, Following Disease Progression on Docetaxel-Based Chemotherapy
Condition: Metastatic Androgen-Independent Prostate Cancer
Intervention: Drug: IMC-1121B and IMC-A12
3 Recruiting Study of IMC-1121B in Patients With Liver Cancer Who Have Not Previously Been Treated With Chemotherapy
Condition: Hepatocellular Carcinoma
Intervention: Biological: IMC-1121B
4 Recruiting Safety Study of IMC-1121B With or Without Dacarbazine to Treat Metastatic Malignant Melanoma
Condition: Metastatic Malignant Melanoma
Intervention: Drug: IMC-1121
5 Recruiting Study of IMC-1121B in the Treatment of Persistent or Recurrent Epithelial Ovarian, Fallopian Tube, or Primary Peritoneal Carcinoma
Conditions: Ovarian Cancer; Fallopian Tube Cancer; Primary Peritoneal Carcinoma
Intervention: Biological: IMC-1121B
6 Recruiting Phase III Study of Docetaxel + IMC-1121B or Placebo in Breast Cancer
Condition: HER2 Negative Breast Cancer
Intervention: Biological: IMCL-1121B
7 Recruiting IMC-1121B in Patients With Metastatic Renal Cell Carcinoma With Disease Progression on or Intolerance to Tyrosine Kinase Inhibitor Therapy
Condition: Metastatic Renal Cell Carcinoma
Intervention: Drug: 1121B
I’m still trying to digest all of the recent news. I’m confused by the recent talk of splitting up IMCL. The questions that I have are the following:
1. Does splitting IMCL mean splitting Erbitux from 11F8 with BMY buying Erbitux and IMCL developing 11F8 and the rest of the pipeline?-->Negatives potential antagonistic situation between IMCL and BMY; up-side for IMCL if 11F8 can out compete Erbitux.
or
2. Does Splitting IMCL mean BMY buying both Erbitux and 11F8 with the remainder of IMCL being spun off as a new equity?-->Advantage preserves the anti-EGFR franchise under one entity with both cash and equity to IMCL shareholders (granted such an equity would have more intrinsic risk once the only approved drug has been divested).
In my opinion it does not make sense to split Erbitux from 11F8--The same company (or companies) that develop Erbitux should develop the second-generation molecule (IMO). I would think that having established sales and distribution channels with Erbitux would facilitate introduction of the second-generation molecule.
We will see what happens.
Comments appreciated,
biophud
FYI--The link below is the patent that I was looking for-->IMCL's patent for 11F8, human anti-EGFR generated using DYAX's phage display. I found it on WIPO (I did not see it listed on USPTO).
http://www.wipo.int/pctdb/en/fetch.jsp?SEARCH_IA=US2005009583&DBSELECT=PCT&C=10&TOTAL=56&IDB=0&TYPE_FIELD=256&SERVER_TYPE=19-10&QUERY=%2811F8%29+&ELEMENT_SET=B&START=51&SORT=41231877-KEY&RESULT=52&DISP=25&FORM=SEP-0%2FHITNUM%2CB-ENG%2CDP%2CMC%2CAN%2CPA%2CABSUM-ENG&IDOC=1305267&IA=US2005009583&LANG=ENG&DISPLAY=STATUS
biophud
If you go to his report and page down you'll find his earlier letters regarding management in general. You'll find them refreshing.
http://www.icahnreport.com/
that was a really great letter and should be studies by ever business student
The Icahn Report
Response to WSJ Opinion Piece 'Why Carl Icahn Is Bad for Investors'
Posted: 12 Aug 2008 12:29 PM CDT
There will always be those who will defend the status quo in corporate governance and attempt to justify the indefensible. The Aug. 1 Wall Street Journal op-ed article, "Why Carl Icahn is Bad for Investors," by UCLA law professor Lynn Stout is a good example of this.
In my opinion, the article was so wrongheaded that I am surprised that it was afforded an appearance in a premier business newspaper. I hope better academic guidance is provided for students in California than that exemplified in the editorial.
Let's consider a few of the comments in the WSJ article by Lynn Stout.
Ms. Stout states, "Shareholder activism can raise the stock price of a particular company, to benefit particular shareholders, in the short run. But it lowers the value of the stock market as a whole, for average investors, in the long run."
I can see no logical sense to any assertion that short-term gains in a particular stock lowers returns for the market as a whole over the long term. What research supports this claim? How can rising stock prices lower overall market returns?
Ms. Stout also suggests that activist investors are only interested in pushing for short-term stock gains after which they "dump" their stock. This is a common charge against activists leveled by faltering corporations and their enablers.
If Ms. Stout had bothered to take even a few minutes of her "busy" day to call me, I would have been happy to explain to her that I have many long term holdings, a fact that any competent first year law student could easily ascertain by a simple review of the public record. In fact my long term holdings have been responsible for the greater part of my net worth.
For example, this year we sold our Las Vegas casino properties, the majority of which we held for over 10 years, realizing a 270% return. I also realized gains of over 265% from the sale of National Energy and Panaco which I had held for over 10 years as well as Transtexas which I had held for over 7 years. Some longer term investments include Vector Group (since 1999), Blockbuster and Time Warner (both since 2004), and ImClone Systems (since 2002). I have owned ACF Industries LLC, a private company, for 24 years and Icahn Enterprises (formerly known as American Real Estate Partners) for 15 years, the stock of which has increased from $19.80 to $67.00 in the past 4 years.
My portfolio has held a great number of other long term holdings. Many stocks have gained in value since my initial investment and involvement – benefiting all stockholders.
Ms. Stout states, "…one favorite hedge fund tactic is to urge the outright sale of the company they have a position in, as Mr. Icahn did in the case of Yahoo. … while the shareholders of an acquired company typically receive a premium in a sale, the shareholders of the … acquirer often lose when the acquirer's stock declines."
This is a truly baffling claim. Is Ms. Stout saying that stockholders in a target company should be concerned about the stockholders in an acquiring company? It is true that stock-for-stock acquisitions sometimes cause the stock in an acquiring company to decline in the short term, but detailed analysis shows that it often rises with the increased revenue and profits as the new assets are incorporated.
But outside of that, Ms. Stout seems to argue against corporate acquisitions generally, because of the alleged debilitating impact it may have on acquiring companies. Someone might want to point out to her that mergers and acquisition activity is a well-established means for company growth and in many cases, positive for the economy.
In fact, it is often a good thing when a faltering company is acquired because those assets can be better utilized under new management. It’s not as if those assets are just thrown to the wolves.
Microsoft and Yahoo were discussing a combination long before my investment.
Ms. Stout states, "A second … hedge fund strategy is to demand massive dividend or share repurchase programs, temporarily raising share prices by draining "excess" cash out of a firm. This is exactly what Mr. Icahn got … at Time-Warner and Motorola. The result is often an anemic, over-leveraged company that lacks the funds to invest in long-term projects and that cannot weather economic downturns."
Wrong. This is not what happened at Motorola and Time Warner. To imply that these companies’ balance sheets are anemic and debt-strapped is simply not the case. I truly hope Ms. Stout reviews the facts and corrects this kind of distortion that is used to bolster her already weak arguments.
Motorola has approximately $7 billion in cash on its balance sheet. The company had a buyback program for 3 years before my involvement. Although I initially encouraged them to buy back additional stock in early 2007, I withdrew my recommendation after a March public disclosure that the company would miss forecasts. I began intently focusing on improving the cell phone business.
In the case of Time Warner, the company is now concentrated on their 'long- term project' of spinning off their cable unit –something I began pushing for when I first invested in the company. Time Warner could easily take on more debt and was more than receptive to the proposal in February, 2006. The company announced an accelerated buyback in February of 2006 under my recommendation and a year later the stock had increased by 18%.
In Kerr McGee, I encouraged a buyback program that improved the capital structure. The company was bought by Anadarko Petroleum in 2006. Investors who bought Kerr McGee stock on the same date I invested and profited from the acquisition by Anadarko realized an approximate 234% return. Since that time Anadarko has increased in value by 13%. Investors are not investing so that companies can hold excess cash on their balance sheet and accept money market returns.
Ms. Stout states, "…shareholder activism hurts average investors by making … managers more reluctant to operate as public companies. A common outcome … is to see the target company sold to a private equity firm. As a result, average public shareholders are finding fewer public companies … to invest in. This may explain why private equity funds able to snap up well-performing companies whose managers are tired of dealing with activists …."
Private equity funds make money because they buy mismanaged public companies and run them like the owners they are, many times ridding the company of the bureaucratic, self perpetuating board. True corporate democracy should produce the same results for public companies; and thus the maximum value for public shareholders. If every public company was managed to its full potential there would be no room in the marketplace for private equity financial buyers. The reason my investments succeed is because I take the time to put the right managers at our companies, replacing inept bureaucrats who place the blame for their failures on others.
The thing shareholders are fighting for (and, incidentally, the best thing for the corporations) is to replace bureaucratic systems with the control that owners will bring to the business in an effort to maximize value. So here we are today. Unaccountable CEOs and boards must go. And it is the responsibility of every shareholder to demand it.
For our companies to be competitive they must be held accountable and pay better attention to shareholders: the owners. This nation is losing its economic hegemony because assets are mismanaged and not utilized to their maximum value.
It is a sad fact that many of the professionals that consider the influence of activist investors seem to adopt the views of PR firms which are paid by corporations with shareholder dollars to mislead and obfuscate the truth. Addressing the real problems facing corporate America will require a thorough understanding of the relevant business dynamics and cannot be solved by fingerpointing or hyperbole.
These issues are far too important for so many journalists and academics, such as Ms. Stout, to continue to confuse public perception. The stakes are extremely high; ineffective and incompetent managements are thwarting the ability of our nation’s businesses to compete globally, leaving too many companies sliding down our current slippery economic slope.
you can get the report by signing up
corky
"never rule out carl"
Imclone Systems Inc. - Inside Out
8/12/2008 8:13 AM ET
More than two years back when Imclone Systems Inc. (IMCL) put itself up for sale, the rumor mill was awash with speculation that Bristol-Myers Squibb Co. (BMY) may seek to buy the company. Bristol-Myers appeared to be the logical suitor as it already owned 16.6% of ImClone shares. That Bristol-Myers brushed aside those rumors and Imclone took itself off the auction block as it didn't get a fat premium is history.
Now, it's no more a rumor. As recently as July 31, Bristol-Myers tabled a $4.5 billion cash offer to acquire the 83.4% of ImClone that it doesn't own. The offer values Imclone at $60 per share in cash and represents a premium of 29% over the closing price of ImClone common stock on July 30, 2008.
Imclone stock shot up a stunning 38% to nearly $64 on the proposed offer and has been trading consistently above $60 since then. Analysts speculate that the elevated share price might force Bristol-Myers to sweeten its bid. Will it raise its offer price or drop out?
A Quick Walk Through Imclone
From a near-extinction in 1995, Imclone has regained its lost glory after an agonizing turnaround, going through several changes of management. Currently, the stock trades around $64, twice its value last year - the rally in the shares being driven by the recent buyout offer from Bristol-Myers. With Imclone adopting hardball tactics and considering a spin off of its pipeline now, there is bound to be an interesting turn of events in the days to come.
Imclone founded by two brothers Sam Waksal and Harlan Waksal in 1984, went public in November of 1991 at $14 per share. In the early 1990s, Imclone was involved in developing Erbitux - dubbed C225, and BEC2, a vaccine for use in small cell lung carcinoma and malignant melanoma. The company entered into a development agreement with Germany-based Merck KGaA for BEC2 in April 1990. Imclone began conducting several safety and efficacy tests (Phase Ib/IIa clinical trials) of Erbitux for various forms of cancer from December of 1994. Erbitux, a monoclonal antibody is a targeted therapy, which attacks cancer cells without damaging the normal cells.
The stock, which reached a high of $27 in its heydays during 1992, languished for the next successive years and plummeted to below $1 in early 1995. It was during that crucial time that billionaire investor Carl Icahn purchased ImClone's stake in Cadus Pharmaceutical Corp. for $6 million, which helped provide funds to develop its cancer drug Erbitux. Then followed a major jump in its stock price in the following year.
By May 1996, Imclone hit a high of $17, buoyed by a couple of positive news - initiation of additional safety and pharmacokinetic study of its lead cancer drug Erbitux for breast cancer, positive results of its BEC-2 vaccine in a pilot study and extension of its collaboration with Merck KGaA for BEC-2 development. In December 1998, Merck KGaA licensed from ImClone the right to develop Erbitux outside of the U.S. and Canada and the co-exclusive right to develop the drug in Japan.
But the euphoria was short-lived, and the stock shed most of its gains in the following years and began trading in a wide range between $4 and $14 till February 1999. The stock regained its momentum during the reminder of that year reaching a high of $43 by December of 1999, on a raft of positive early-stage study results of Erbitux and advancement of the drug to late stage in one of the trials. Investors were excited by the high response rate of Erbitux and the stock closed the year at $39.13, reflecting an impressive 289% growth from the beginning of the year.
The stock continued its upward journey in 2000, reaching an all-time high of $171.98 on March 7 (Adjusted for dividends, the close price on March 7 was $78.75). In one of the trials, which enrolled 123 late-stage colon cancer patients, administration of Erbitux combined with chemotherapy drug irinotecan, shrank the tumors in 22.5% of the patients. High hopes for Erbitux continued to propel the stock further. The stock, which underwent a 2:1 split on October 16, closed the year at $44.
In February 2001, Imclone was granted Fast Track designation for Erbitux in the treatment of colorectal cancer patients resistant to chemotherapy drug irinotecan. Colorectal cancer is the third most common cancer diagnosed in the United States.
Anticipating a blockbuster or near-blockbuster sales status for ImClone's investigational cancer drug Erbitux, Bristol-Myers inked a $2 billion marketing deal with Imclone in September of 2001. Under the agreement, Imclone agreed to share 40% of the profits derived from Erbitux with Bristol-Myers. The deal required Bristol-Myers to pay $1 billion in upfront payments, $200 million immediately, followed by two payments of $300 million and $500 million during the course of the drug approval process. Bristol-Myers also agreed to buy a 19.9% stake in ImClone for $1 billion at a price of $70 each and acquired marketing rights to Erbitux in the U.S. and Canada, in addition to 2 seats on Imclone board. Now, Bristol-Myers owns 16.6% stake in Imclone and a seat on Imclone's nine-member board.
Coming Events Cast Their Shadows Before
Imclone had completed submission of Erbitux filing on October 31, 2001 for regulatory approval. However, the much-touted drug received a deadly blow on December 28, 2001 when the FDA refused even to review Erbitux, citing inferior data and poor trial design. The regulatory agency rejected the application as the company failed to demonstrate the need for including irinotecan in the trial and also for failing to prove that Erbitux would have achieved the same benefit of tumor shrinkage all by itself. There were media reports that FDA had informed Imclone of the pitfalls in the Erbitux study design as early as August 2000. Imclone's stock lost 16% of its value in a single day.
That was the start of Imclone's woes, plaguing it for the next two years just as the old adage goes, "When it rains, it pours."
A month after Imclone's Erbitux application was rejected, the company was dealt yet another blow. In January 2002, Imclone's Erbitux came under the scrutiny of a House subcommittee, sending its already battered stock further down. Class-action suits were filed against members of the company's board of directors for alleged insider-trading. Imclone, which was trading as high as $75.45 in December 2001 had cratered to $19 by the end of January 2002.
The following month, Imclone held talks with the FDA and sought guidance on how to proceed with the resubmission of its Erbitux application, rekindling hopes for the drug, which was mirrored in its stock price. By March, the stock had improved over 28% to settle at $24.63.
It wasn't long before when the stock was on the road to recovery, did yet another crisis strike Imclone. An insider trading case was launched by the SEC against Imclone founder and CEO Sam Waksal in April 2002. Hardly days before did the FDA reject the Erbitux filing, Waksal and his family members had sold over $150 million of Imclone shares at peak prices. Investors lost confidence in the company and the stock went into a tailspin in the successive months as more bad news kept pouring in.
Amid several allegations and mounting dissatisfaction among the management as well as investors, Sam Waksal resigned as CEO in May 2002 and was replaced by his brother Harlan Waksal who was then serving as the company's Chief Scientific Officer.
Sam Waksal, who had an ignominious exit from the company he founded, was arrested by the FBI agents on June 12, 2002 on insider-trading charges and freed on a $10 million bail. The same day, the SEC filed insider trading charges against him and nearly a year later was sentenced to seven years and three months in prison. Sam Waksal is scheduled to be released this month after serving about five years of his seven-year sentence. Martha Stewart, the founder of Martha Stewart Living Omnimedia Inc. (MSO) and an investor in Imclone was also indicted over insider trading as she sold nearly 4000 shares of ImClone, a day before the FDA announced its decision of rejecting Erbitux in December 2001.
Just when the company was beginning to put things in order, it received a disastrous blow. In January 2003, the Feds notified the company that it was liable for taxes that were not withheld as one or more of its employees who exercised certain non-qualified stock options in 1999 and 2000 failed to pay income taxes for those years. Two months later, the IRS commenced audits of the company's income tax and employment tax returns for the years 1999-2001.
On March 31, 2003, Imclone announced that it would delay filing its 2002 annual report with the SEC and incur a charge of at least $23.3 million related to tax liability. The reason for the delay being, the company needed to restate financial statements beginning with 2001 and for period prior to 2001. The restatement was attributable to the failure of the former CEO Sam Waksal to pay taxes on the exercise of certain warrants and options.
As if all this was not enough, Imclone received a delisting warning from the NASDAQ on April 9, 2003 for failing to file its financial report for fiscal 2002 and was given grace period till June 23 to file its 10-K. However, the company was able to avert that crisis by filing its annual report just before the deadline.
During the same month (April of 2003), the company carried out a shake-up of its management in connection with the previously disclosed internal review related to withholding tax liabilities. Harlan Waksal resigned from the posts of President and CEO and Daniel Lynch took over as acting CEO. In February 2004, Lynch was officially named chief executive.
Despite the cloudy headlines, Imclone also had its silver lining. The study results of Erbitux presented by Imclone's European partner Merck KGaA, at the ASCO (American Society of Clinical Oncology) meeting in June of 2003 indicated that Erbitux when used in combination with irinotecan for treating metastatic colorectal cancer, shrank tumors in 22.9% of the patients and showed 4.1 month median time to progression and 55.5% overall rate of disease control. Erbitux when used alone showed a 10.8% response rate, 1.5 month median time to progression and 32.4% overall rate of disease control. The results presented by Merck KGaA at the ASCO meeting were identical to Imclone's study results, which were rejected by the FDA in 2001.
Merck KGaA's findings renewed interest in Erbitux, which was almost on the verge of getting lost by the kerfuffle at Imclone. In June of 2003, Imclone and Bristol-Myers met with the FDA to discuss clinical trial data including the Merck KGaA-sponsored clinical trial of Erbitux in patients with metastatic colorectal cancer as well as data from completed ImClone-sponsored clinical studies.
The Light Dawns
August 14, 2003 marked the end of a long wait. Imclone filed with the FDA seeking approval of Erbitux in combination with irinotecan, for the treatment of patients with irinotecan-refractory metastatic colorectal cancer. The filing was accepted for review on October 10, 2003. The stock, which had taken a severe beating in the past two years, began to gain steam on the prospects for Erbitux, closing the year at $39.66.
Finally the D-day arrived! On February 12, 2004, the FDA approved Erbitux in combination with irinotecan in the treatment of patients with metastatic colorectal cancer who are resistant to irinotecan-based chemotherapy and for use as a single agent in the treatment of patients with metastatic colorectal cancer who are intolerant to irinotecan-based chemotherapy. Thereafter it was no looking back for Imclone.
In April of 2004, Imclone reported its quarterly profit in more than eight years as revenues rose five-fold on the recognition of license fees and milestone payments from its partners Merck KGaA of Germany and Bristol-Myers, related to Erbitux sales.
The stock continued to be driven by positive news about Erbitux. The drug was approved in the European Union on June 30, 2004 for treatment of metastatic colorectal cancer.
However, Imclone did have its share of bad tidings too in 2004. The company's BEC2 cancer vaccine for small cell lung cancer failed to meet its primary endpoint of survival. In all, though 2004 was a banner year for Imclone, its stock closed the year at $46.08, well-off from its July high of $87.24.
Back To Square One
Imclone landed in trouble again in 2005 as higher operating costs dented its profits, despite a surge in Erbitux sales. In November of that year, Lynch resigned his positions of CEO and Director by mutual agreement with the company's Board of Directors. Philip Frost took over the post of CEO on an interim basis. By the end of 2005, the stock had fallen down to $34.24.
Following the departure of Frost on January 23, 2006, Joseph Fischer was named the interim CEO. A day later, Imclone announced that its Board of Directors had engaged the investment bank Lazard to conduct a full review of the company's strategic alternatives to maximize shareholder value, which might include a sale of the company.
The company continued in its effort to expand the uses of its star drug Erbitux. On March 1, 2006, the FDA approved Erbitux for use in combination with radiation therapy to treat patients with squamous cell cancer of the head and neck that cannot be removed by surgery. The drug was also approved for use as a monotherapy to treat patients whose head and neck cancer has spread despite the use of standard chemotherapy.
Meanwhile, on September 19, 2006, Imclone lost a patent lawsuit filed against it by Israeli research institute Yeda in 2003. The disputed patent covers the use of monoclonal antibody with chemotherapy, the basis on which Erbitux works. Imclone licenses the patent for Erbitux from Sanofi-Aventis (SNY). ImClone and Sanofi-Aventis resolved the issue late last year by agreeing to pay $60 million each to Yeda for full and final settlement of the claims. In addition, ImClone will make a contingent payment to Yeda of a low single-digit royalty on sales in and outside of the U.S. and will pay Sanofi-Aventis a low single-digit royalty on sales outside of the United States.
Tough times were back again at Imclone and by the end of September 2006, the stock dipped to around $26.
Enter Icahn, The Tough Taskmaster
Carl Icahn, a corporate raider well-known for bringing about management changes to boost shareholder value in the company he invests, became a director of ImClone in September 2006.
Icahn had long been calling for the ouster of Imclone's Chairman David Kies, and five other directors including interim CEO Joseph Fischer accusing them of the inept handling of the patent lawsuit related to Erbitux and for failing to capitalize on the potential of Erbitux.
In August of 2006, Icahn turned down a buyout offer from a major international pharmaceutical company, which valued Imclone at $36 per share, saying the offer was too low. The offer represented a 32% premium to Imclone's stock price then.
Imclone, which hoisted a 'For Sale' sign over its business in January 2006, took itself off the auction block in August that year and Icahn was blamed for derailing the offer, which according to some reports was from Sanofi-Aventis IMC-11F8.
The battle for the control of Imclone came to an end on October 10, 2006 when David Kies resigned as Chairman of Imclone and handed over the reins to Icahn. Currently Icahn owns about 13% stake in Imclone. The company, which had been without a CEO since Icahn ousted the management in October of 2006, appointed John Johnson to the post in August 2007.
Now, Icahn has been quick enough to rebuff the current takeover bid from Bristol-Myers saying that the offer substantially undervalues the company, given the strength of Imclone's product pipeline. He is also concerned that one of the directors on the ImClone Board who is the Bristol-Myers designee would have had access to the information discussed at previous meetings concerning the potential spin off of Erbitux from its other pipeline, and how this restructuring might enhance stockholder value.
Pipeline - Half Full Or Half Empty?
Imclone is a one-trick pony dependent upon Erbitux, and the other investigational cancer drugs in its pipeline are years away from making it to the market. The company has eight antibodies under preclinical testing for various forms of cancers.
Erbitux, the lead drug of Imclone, faces competition from Genentech Inc's (DNA) Avastin and Amgen Inc.'s (AMGN) colon cancer drug Vectibix. Avastin is approved by the FDA for advanced colorectal cancer, advanced non-squamous, non-small cell lung cancer and metastatic HER2-negative breast cancer. Erbitux notched $1.3 billion in global sales in 2007, compared to $1.1 billion in 2006. Avastin sales totaled $2.29 billion in 2007, up from $1.75 billion in 2006.
Imclone is aggressively pursuing further market penetration of Erbitux in the U.S. and Europe through product label expansion in colorectal cancer and head and neck cancer as well as in non-small cell lung cancer. As recently as July 16, Erbitux was approved in Japan to treat patients with advanced or metastatic colorectal cancer.
The company is making a meaningful foray into the lung cancer market where there is ample room for growth. Lung cancer is the most common cause of cancer-related death, responsible for 1.3 million deaths annually. According to statistics, survival rates for lung cancer are generally lower, compared to other types of cancers. The overall five-year survival rate for lung cancer is about 16%, compared to 65% for colon cancer, 89% for breast cancer, and over 99% for prostate cancer.
A number of new drugs in combination with chemotherapy to improve survival rate in lung cancer, are being evaluated but thus far none has succeeded, barring Genentech's Avastin. But Avastin, a targeted monoclonal antibody, cannot be used in treating people with squamous cell cancers and who face increased risks of pulmonary hemorrhage and other complications.
The recent results of Imclone's late-stage study dubbed FLEX (First-line in Lung cancer with Erbitux) have shown that patients with advanced non-small cell lung cancer, treated first-line with a combination of Erbitux and chemotherapy, live significantly longer (on average 5 weeks longer) than patients treated with the platinum-based chemotherapy alone. In the FLEX trial, Erbitux in combination with chemotherapy, benefited patients with adenocarcinoma as well as squamous cell cancer, the two most common subtypes of non-small cell lung cancer, according to the company. Avastin cannot be used to treat people with squamous cell lung carcinoma where the tumor is located deep within the lungs.
Imclone is expected to seek FDA approval for Erbitux in treating lung cancer in the fourth quarter. However, according to some analysts, Erbitux in no way poses a threat to Avastin. Avastin has an overall survival benefit of nearly two months, compared to Erbitux's 5 weeks and therefore Erbitux is going to be preferred only by non-small cell lung cancer patients with squamous cell histology. Cowen analyst Eric Schmidt is of the view that Erbitux upon approval for non-small cell lung cancer would add $700 million in annual U.S. sales and boost shares by 35%.
According to the results of the company's first line colorectal cancer study dubbed CRYSTAL, which were released in the second half of last year, Erbitux is especially useful for colon cancer patients with normal gene KRAS while those with mutated KRAS might be harmed by Erbitux therapy. That spells some trouble for Imclone because it is estimated that between 30%-40% of all patients with colorectal cancers have a KRAS mutation that would ultimately render them ineligible for EGFR-targeted therapy like Erbitux. But Erbitux still has a chance to serve 60% of the colon cancer patients.
ImClone's IMC-11F8, which is also a target growth factor receptor, just like Erbitux, is being evaluated for its potential as cancer therapeutics. According to the company, IMC-11F8 is a follow-up form of Erbitux. While Erbitux is a human/mouse chimeric monoclonal antibody, IMC-11F8 is a fully human monoclonal antibody. IMC-11F8 is expected to enter late-stage studies in the first half of 2009.
Betting On The Erbitux Successor
With patent expirations looming large on Bristol-Myers, acquiring Imclone, with which it already has a partnership to market the blockbuster cancer drug Erbitux, represents a wise deal for Bristol-Myers. Of late, Bristol-Myers has shifted its focus on biopharmaceuticals and has undertaken a thorough strategic review of its non-pharmaceutical assets. As part of the transformation, Bristol-Myers recently sold its wound therapy and surgical care unit ConvaTec to private equity firms Nordic Capital and Avista Capital Partners for $4.1 billion. Therefore, now is the time for Bristol-Myers to make an acquisition as it is flush with cash.
Imclone's IMC-11F8, a cancer drug under development is expected to be a potential successor to Erbitux. With IMC-11F8, being touted as "the next generation Erbitux", it is no wonder that Bristol-Myers will like to get its hands on the supposed star drug in waiting. In a recent statement, Imclone said that Bristol-Myers does not have rights to market IMC-11F8 under its existing contractual agreement, while Bristol-Myers claims it otherwise.
Under the existing agreement, ImClone receives a distribution fee based on a flat rate of 39% of net sales of Erbitux in North America. The agreement, which was amended in July 2007 to provide for additional development funding for certain indications, expires in September 2018 with respect to Erbitux in the U.S.
Imclone's recent statement contradicts its earlier stance when it said that the exclusive rights to market IMC-11F8 outside the United States and Canada and co-exclusive development rights in Japan belong to ImClone Systems, while commercial rights to the antibody in the U.S., Canada and Japan fall within the scope of ImClone Systems' commercial agreement with Bristol-Myers regarding Erbitux.
Conclusion
A potential acquisition of Imclone would strengthen Bristol-Myers' competitive positioning as a pure pharma play, making it a more attractive buyout target. But that said, Imclone has already thumped its nose at Bristol-Myers' offer.
Will Bristol-Myers sweeten its bid? If the takeover deal fails, the issue of rights to the next generation Erbitux might lead to the next legal bickering between Imclone and Bristol-Myers. It's a wild guess though.
Aug. 7 (Bloomberg) -- Roche Holding AG may have to boost its bid for Genentech Inc. by almost 50 percent once test results show the cancer drug Avastin, sold by both companies, works against an expanding list of tumors.
Roche, of Basel, Switzerland, has offered $89 a share for the 44 percent of South San Francisco-based Genentech it doesn't already own. While a Genentech special committee evaluates the bid, Avastin is being tested against 30 different malignancies, including early-stage colon cancer, the second-leading cause of U.S. cancer death.
Avastin may become a first-choice drug against colon tumors if it's successful in studies to be released early next year. The drug's $3.4 billion in annual sales will grow by $2.2 billion should doctors begin using the treatment before colon tumors spread to other organs, said Michael G. King, an analyst at Rodman & Renshaw in New York. That may attract a higher bid and push Genentech's share price ``well north of $100 -- maybe $120 or $130,'' he said in a telephone interview.
``The clock is ticking for Roche to wrap this up before more Avastin trials confirm we should get an even higher premium for Genentech,'' said David Heupel, a Minneapolis-based manager with the $60 billion fund Thrivent for Lutherans. ``If you're going to take a quality company away from me, you better make it worth my while.''
The fund owned 376,250 Genentech shares as of June 30, according to data complied by Bloomberg.
Genentech's share price is above Roche's July 21 bid, showing investors expect a higher offer. The shares rose 35 cents to $96.40 at 9:48 a.m. in New York Stock Exchange composite trading. Roche fell 3.4 Swiss francs, or 1.8 percent, to 187.6 francs in Zurich.
Stealth Timing
Roche, already the world's biggest maker of cancer drugs, timed its offer to get Genentech at a bargain price before the new Avastin research, said Rodman & Renshaw's King.
Investors say the strategy may not work.
``I have a number in my head for what would be a fair price,'' said former Genentech chief operating officer Myrtle S. Potter, who held 3,087 shares when she last disclosed holdings in 2005. ``Suffice to say, there is general agreement out there that the Roche offer doesn't represent that number,'' she said in a telephone interview.
Roche won't say whether it will raise its bid, which spokeswoman Nina Devlin called ``fair and generous'' in a telephone interview.
Genentech formed a special committee of three board members to evaluate the Roche offer and hired New York-based Goldman, Sachs & Co. as financial adviser. Roche's adviser is Greenhill & Co., also of New York. Genentech's committee has no deadline for its response, said Geoffrey Teeter, a company spokesman, in a telephone interview.
$50,000 a Month
Avastin is the world's third-best selling cancer drug, after Rituxan and Herceptin, which Genentech and Roche also sell together. The medicine already is approved for patients with cancers that have spread beyond the breast, colon and lung. The treatment, which costs as much as $50,000 a month, works by starving a tumor's blood supply. The drug is Genentech's biggest product and is being tested in more than 400 clinical trials involving 40,000 patients worldwide, according to Roche and Genentech.
A U.S.-funded trial called C-08 is testing Avastin as a first-line treatment on people with colorectal cancer, a disease the National Cancer Institute says will kill as many as 50,000 Americans this year. Analysts expect the results in early 2009.
The usual treatment for colon cancer now is surgery to remove the tumor and six months of chemotherapy, followed by annual colonoscopies. People who are cancer-free after five years are declared cured. Those whose cancer reappears may get more chemotherapy along with Avastin.
Patients Would Double
If the new study leads to Avastin's approval in people with an early stage of the disease, ``that would double the number of patients being treated'' with the drug, said Carmen Allegra, the oncology chief at University of Florida in Gainsville and lead researcher on the C-08 trial, in a telephone interview.
The trial enrolled its last patients in September 2006 and follows test subjects through a year's treatment, he said.
``Based on the safety data, we haven't seen an increased risk of serious complications in patients who received Avastin with that first regimen of chemotherapy, which is a very encouraging sign,'' Allegra said.
Success in the colon cancer study also ``would make you more desirous to test it in other types of solid tumors,'' foreshadowing the drug's possible use as an early treatment for other forms of the disease, Allegra said.
What's Life Worth?
Even if Avastin succeeds in the C-08 study and becomes ``the standard of care'' for colon cancer, the treatment's cost could limit use, said J. Randolph Hecht, an oncologist at University of California at Los Angeles' cancer center.
``I don't think it is a slam-dunk,'' he said in an interview.
Genentech considers Avastin ``in the early to middle stage of development,'' said Robert Mass, the company's oncology chief, in a July 30 telephone interview. Success against colon tumors, he said, would mean ``the likelihood of it benefiting breast or lung cancer patients'' as an early-stage treatment ``increases substantially.''
It might also boost Genentech's price, said Rodman & Renshaw's King. He noted Roche's offer is 8.8 percent more than Genentech's share price the day before the bid was announced -- a premium far less than the 67 percent paid by Tokyo-based Takeda Pharmaceutical Co. in its May acquisition of Millennium Pharmaceuticals, a Cambridge, Massachusetts biotechnology company, according to Bloomberg data.
Other Acquisitions
Roche's premium also is below the 47 percent that London- based AstraZeneca Plc paid for MedImmune Inc., of Gaithersburg, Maryland, in June 2007, and the 25 percent that Basel, Switzerland-based Novartis AG paid in the 2006 purchase for Chiron Corp., another biotech company.
Roche faces further pressure to buy Genentech because its option to be first to license any Genentech drugs expires in 2015, said Jason Zhang, an analyst at BMO Capital Markets in New York, in a July 21 note to clients.
``The loss of that option could cost Roche tens of billions of potential revenue,'' Zhang said.
To contact the reporter on this story: Lisa Rapaport in New York at David Olmos in San Francisco at dolmos@bloomberg.net.
Last Updated: August 7, 2008 09:51 EDT
ImClone's Value May Rest On Debate Over Next Erbitux
10:37 AM EDT August 7, 2008
By Thomas Gryta
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--The battle for ImClone Systems Inc. (IMCL) may come down to the fight over who has rights to the follow-up to the company's sole but increasingly successful product, the cancer treatment Erbitux.
ImClone claims to own the complete rights to the next-generation Erbitux, which carries high expectations but isn't seen on the market until well into the next decade. That interpretation contradicts the company's own statement two years ago and is disputed by Bristol-Myers Squibb Co. (BMY), which co-markets the current Erbitux in the U.S. and is seeking to buy the 83% of ImClone that it doesn't own for $4.5 billion.
ImClone has said Bristol's offer "greatly undervalues" the company partly because of its product pipeline, of which the next-generation Erbitux is a key part.
Resolving the next-generation Erbitux dispute could influence billions of dollars in sales in the next decade, ImClone's total value, the action of other possible suitors and whether ImClone attempts to spin off its pipeline, a move the company said it was considering.
The disagreement centers on whether the drug, called IMC-11F8, was derived in any way from the current Erbitux and if its development can be viewed as a "competing product," as defined by the 2001 agreement between the companies. If either of those are true, Bristol is entitled to rights to the drug.
"My read is that the contract language is nebulous," Cowen & Co. analyst Eric Schmidt said. There is "clearly room for (Bristol) to claim one thing and (ImClone) the other."
Because of the confusion, the battle over IMC-11F8 could end up in front of an arbitrator and may take years to resolve - something that Bristol-Myers can avoid by buying ImClone, which may mean raising its offer of $60 a share. Wall Street expects a higher offer for ImClone as the stock closed Wednesday at $64.07 and recently traded at $64.09.
The IMC-11F8 dispute comes as the first-generation Erbitux gains traction. Erbitux is approved to treat head, neck and colorectal cancer; is expected to be filed for approval in lung cancer in the fourth quarter; and is being studied in multiple other forms of the disease.
UBS projects 2008 global Erbitux sales of $1.7 billion, up 31% from $1.3 billion in 2007, and sees that rising to $3.1 billion in 2011.
Such sales estimates aren't available for IMC-11F8, which won't enter pivotal trials - likely to last at least 2 1/2 years - until the first half of 2009. The success of the first-generation Erbitux reduces some risk on the follow-up because it has a similar target. The key difference between the two is that the new drug is a human antibody, expected to be safer and have less-frequent dosing, while Erbitux is a hybrid of a human and mouse antibody.
The unknown over IMC-11F8's rights is likely to give pause to other potential suitors of ImClone or any spinoff of its pipeline. That's because other companies may be less willing to pay billions for a company if they then have to share the profits on a key future drug.
Of course, if Bristol buys ImClone, that issue would be moot, which is why some might see the recent posturing - that started from ImClone before Bristol made its offer - as a bargaining tactic.
Conflicting Views
ImClone has asserted, as recently as two weeks ago, that it owns all the rights to IMC-11F8, and in a statement this week said that Bristol-Myers "may have no rights to market" the drug.
Bristol-Myers disagrees. "We believe we have the rights to 11F8 under our existing contractual agreement," a Bristol-Myers spokeswoman said this week, with no further comments on the company's strategy for claiming the rights.
The agreement, dating from 2001, covers Erbitux, along with "all fully humanized or human" versions, analogs or derivatives of the drug.
ImClone's recent comments even conflict with its own language from April 2006, when ImClone won an arbitration decision against Erbitux's international marketing partner, Germany's Merck KGaA (MRK.XE), for the international rights related to IMC-11F8. The decision gave ImClone the rights to develop and commercialize the drug outside the United States and Canada, rights that Merck KGaA currently has with Erbitux.
At the time, ImClone stated that "commercial rights to this antibody in the U.S., Canada and Japan fall within the scope of ImClone Systems' commercial agreement with Bristol-Myers Squibb regarding Erbitux."
Officials from ImClone weren't immediately available to comment, but the company was under different management when the statement was issued.
Current management is said to frustrated with the 2006 statement, based on comments from a person familiar with the situation, but the company may try to justify that statement by claiming it refers to Bristol-Myers' right of first refusal for all of ImClone's pipeline products, which Bristol had until that right expired in September 2006.
ImClone also may claim that IMC-11F8 is actually a separate drug, not derived from Erbitux in any way, but that angle will force it to deal with the restrictions on developing a competing product that are contained in the agreement.
Under the agreement, a competing product is defined as one that "has as its only mechanism of action an antagonism of the EGF receptor."
Both drugs attack cancer cells by latching onto, and blocking, a growth-related trigger called epidermal growth-factor, or EGF, that occurs in some cancers.
"If this drug is therapeutically effective because it interferes with - or otherwise antagonizes or blocks or inhibits - the EGF receptor and does nothing else, then it is a competing product," said John P. Iwanicki, a patent attorney and senior partner specializing in the pharmaceutical industry with Banner & Witcoff Ltd in Boston.
If it is a competing product, it must either be divested or ImClone must offer Bristol-Myers to participate in the commercialization and development on a 50/50 basis.
Even then, ImClone still may have an argument. The company could argue that the restriction only applies to late-stage development in North America, where Bristol holds rights to Erbitux. IMC-11F8 is being developed in Europe, where ImClone controls all rights to the drug.
That argument may hold water, Iwanicki said, and ImClone could begin developing or commercializing IMC-11F8 in the U.S. after September 2008 when ban on competing products expires.
-By Thomas Gryta, Dow Jones Newswires; 201-938-2053; thomas.gryta@dowjones.com
Each business day, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold and sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.
While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
However, the rating does not incorporate all of the factors that can alter a stock's performance. For example, it doesn't always factor in recent corporate or industry events that could affect the stock price, nor does it include recent technology developments and competitive dynamics that may affect the company.
For those reasons, we believe a rating alone cannot tell the whole story, and that it should be part of an investor's overall research.
The following ratings changes were generated on Aug. 5.
Shares of ImClone Systems were upgraded to buy from hold Tuesday. The New York-based health-care company specializes in the development of treatment for cancer patients. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses and should give investors a better performance opportunity than most stocks we cover.
ImClone's revenue growth has slightly outpaced the industry average of 1.4%. Over the same quarter a year ago, revenue rose by 10.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Compared to where it was trading one year ago, ImClone's share price has jumped by 95.57%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, ImClone should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
ImClone's earnings per share, or EPS, declined by 19.4% in the most recent quarter compared to a year ago. The company has suffered a pattern of declining EPS over the past two years. However, we anticipate this trend will reverse over the coming year. This year, the market expects an improvement in earnings ($1.21, vs. 45 cents).
ImClone's debt-to-equity ratio of 0.73 is somewhat low overall, but it is high when compared to the industry average, implying that management of the debt levels should be evaluated further.
The change in net income from the same quarter one year ago has exceeded that of the S&P 500 but is less than that of the biotechnology industry average. Net income has decreased by 20.7% when compared to the same quarter one year ago, dropping from $31.91 million to $25.29 million.
ImClone had been rated a hold since Nov. 28, 2007.
ImClone's Late-Stage Pipeline Includes a Potential Erbitux Competitor
The Pink Sheet Daily. 2008 Aug 5, S Haley
ImClone's pipeline, with five clinical-stage monoclonal antibodies, one a late-stage Erbitux look-alike, and another half-dozen nearing IND readiness, makes the biotech a logical acquisition for any pharma looking to bolt on not only biotech capabilities but an oncology portfolio.
Indeed, the maturity of ImClone's pipeline of cancer biologics is one reason Bristol-Myers Squibb is trying to buy out the remaining shares it doesn't already own in the company. That and gaining control of the blockbuster oncologic Erbitux (cetuximab), which the companies currently commercialize together ("The Pink Sheet" DAILY, July 31, 2008).
Altogether, New York-based ImClone has five monoclonal antibodies in the clinic and another six are IND ready, ImClone Chief Medical Officer Eric Rowinsky told investors during the firm's half-year earnings call July 24.
ImClone's lead candidate is IMC-1121B, an unpartnered angiogenesis inhibitor that targets vascular endothelial growth factor-2. It is the biotech's first molecule to enter Phase III since Erbitux. ImClone is accelerating 1121B's development based on "clinical signals exhibited by other VEGF inhibitors that would not be expected to inhibit the VEGF-2 receptor as strongly as" it does, Rowinsky said.
A Phase III study of 1121B in metastatic breast cancer is set to launch this quarter under a special protocol assessment with FDA that stipulates a progression-free survival endpoint.
The study aims to enroll 1,100 women with unresectable locally recurrent or metastatic breast cancer who have not received prior chemo ("The Pink Sheet" DAILY, April 22, 2008). It is being conducted by the Cancer International Research Group.
A second Phase III trial is planned to launch within the year testing 1121B as a second-line therapy against gastric cancer, "an indication with a much more abbreviated time line," Rowinsky noted.
ImClone also has Phase II studies going to test 1121B in metastatic melanoma, unresectable liver cancer and refractory kidney cancer, Rowinsky said, adding that all of the trials are "briskly accruing patients."
A Phase II trial is also recruiting patients for an open-label study of 1121B against platinum-refractory persistent or recurrent epithelial ovarian, fallopian tube or primary peritoneal cancer. Over the next few months, Phase II studies are set to open in breast, lung, colorectal and prostate cancers, as well.
IMC-11F8 has Erbitux-like characteristics
IMC-11F8, an anti-epidermal growth factor inhibitor, has EGFR-binding characteristics similar to cetuximab, according to an abstract presented in June at the annual meeting of the American Society of Clinical Oncology. Interim data from the 44-patient Phase II open-label study in metastatic colorectal cancer described in the abstract show an acceptable safety profile, as well as a 65.2 percent objective response rate, Rowinsky said during the call.
KRAS genetic status of the tumor was not part of patient selection for the trial, but a retrospective analysis is being performed, Rowinsky said. EGFR inhibitors, including Erbitux, have demonstrated efficacy in patients with wild-type KRAS tumors, but not in those with tumor KRAS mutations.
ImClone is in final planning for global Phase III studies of 11F8 in CRC and in non-small cell lung cancer, which will prospectively screen patients "based on molecular profiling data" identified from trials of other EGFR inhibitors, Rowinsky said. The trials are set to launch in 2009.
Commenting on the BMS takeover bid, Rodman & Renshaw analyst Michael King observed that the increased focus on personalized medicine led by the KRAS biomarker in CRC and the potential role of EGFR inhibitors in NSCLC "may have hastened [BMS'] decision to step in."
There has been speculation that BMS, also based in New York, may have timed its offer to gain control of IMC-11F8, which, according to ImClone, could "have significant competitive effect" on Erbitux and which ImClone says it owns exclusively ("The Pink Sheet" DAILY, Aug. 4, 2008).
IMC-A12 targets the insulin-like growth factor-1 receptor
ImClone is planning to begin pivotal studies of IMC-A12 in the second half of 2009.
During the second quarter of 2008, Phase II studies opened in head and neck cancer and in advanced liver cancer. In addition, a series of Phase I/II trials of IMC-A12 in advanced pancreatic cancer opened enrollment in May, a Phase I trial testing it in combination with the mTOR inhibitor temsirolimus (Wyeth's Torisel) in patients with advanced solid malignancies and lymphoma launched in June, and a Phase II trial in patients with several types of soft tissue sarcoma launched in July.
During the second half of the year, other Phase II studies are set to test A12 in second line treatment of prostate, neuroendocrine and NSCLC and in early stage CRC.
Many of those studies are being conducted by U.S. cooperative groups through the National Cancer Institute, Rowinsky said, adding that they do not duplicate ImClone-sponsored trials.
Finally, Phase I programs for IMC-18F1, a VEGFR-1 inhibitor, and IMC-3G3, which targets platelet-driven growth factor alpha, will be completed in the second half of 2008, and Phase II studies of both are planned for 2009.
ImClone plans to submit INDs in the second half of 2008 for six other candidates, including an IGg-1 mAb that targets FMS-like tyrosine kinase3, the most commonly mutated protein in acute myelogenous leukemia.
Dew, let me guess: Bristol and Imclone sue each other, perhaps with the latter occurring after Bristol attempts to 'sandbag' the NSCLC sBLA (the key to a rapid near-term rise in the share valuation is still likely the lung indication, possibly already occurring if the off-label use there is indeed already increasing rapidly)....and the shareholders sue both boards as well as Carl individually. What a potential mess! (All speculation, of course.)
Make you a deal: I'll promise to refrain from litigation if you will promise such too!...Do we have a litiginous society, or what?!
Best regards,
rjurko (Bob)
Hi, Bob. Long time. Congrats on your IMCL gain no matter how this turns out.
It sounds to me as though litigation is the likely outcome—I’d put the probability at greater than 90%. Regards, Dew
Dew, I would have to agree that it is waaaaay too coincidental that this bid comes just 7 weeks before the September 19th (approx.) deadline for the demise of the Bristol rights in the non-competition clause...in which case the pressure on Bristol to secure some sort of insulation from competition from Imclone will rise EXPONENTIALLY over the next few weeks.
Thus, and as someone has already pointed out, it would seem to be very much in Imclone's interest to take plenty of time to evaluate the Bristol offer...and since the fiduciary responsibilities of the Board seem to demand this caution anyway, I think it is easy to see the reasons for much of the wording of Carl's response.
In other words, it would not surprise me in the least to see Imclone merely 'eat up the clock' these next few weeks, as long as they can justify that approach otherwise (and I believe that they can, as above). I would suspect that Carl knows well the value of patience in these matters anyway. I believe that Bristol has blinked first, and that they are at a disadvantage in the bargaining now from several perspectives.
All IMHO, and with best regards,
rjurko (Bob)
>I agree 11F8 discussions on the recent CC and BMY’s buyout offer are related.<
After today’s mud slinging, there is no longer any doubt whatsoever.
King says $82 NPV
A survey of 7,200 practicing U.S. oncologists by health-care market research firm MDRx Financial shows that Erbitux is now being used to treat more than 3% of all lung cancer cases in the US, up from less than 0.8% before the data release. MDRx estimates that in July, 5% of all Erbitux sales were for the treatment of lung cancer, up from an average of 0.7% previously.
M King of R&R did a nice sum-of-the-parts analysis and discounted back to 2008 to give a net present value for imclone. He took into account lung sales of erbitux where Werber did not (Yaron only considered 2009 sales for lung). King gives maximum sales of $800M worldwide in 2015 for nsclc, which I believe could be the minimum, so even Kings fair value is on the conservative side.
Kings NPV for imclone on a per share basis, using 94M fully diluted shares breaksdown as follows. 67 for erbitux, 4 for cash, 5 for manufacturing and 6 for pipeline for a total $82/sh NPV. That does not add in any value for a takeover premium. Y Werber values erbitux at $53 based on a multiple of 9XEV, using 2009 revenue of erbitux. This gives very little value to sales in lung cancer in subsequent years. If you add $9 per share to Werber value for the lung cancer indication (King uses $19 NPV) the two estimates of fair value would be the same.
The 1st paragraph shows that erbitux is already penetrating 3% of the lung indication and it is not even on all compendias yet. I estimate that if erbitux penetrates 10% of lung next year (2009) then worldwide sales in lung would be $800M. Note that King is using $800M as the maximum sales out till 2015. Conservative in light of the recent physician survey by MDRx.
Also I’m not sure that 94M shares fully diluted is correct, since 6.6M of those never get issued for IMCL under $90/sh (bondholders).
Kings fair value does not give any value for sales in Japan (>$400M), adjuvant (>$1B) or other indications currently in trials.
Full value would include these other parts. Full net present value is greater than $90 per share. The $60 offer from BMY is fair without the erbitux lung cancer indication or adjuvant, they are hoping to get those parts for free, and Werber appears to be assisting. IMHO.
I agree 11F8 discussions on the recent CC and BMY’s buyout offer are related.
IMCL's CEO had to keep his mouth shut until Sep. 19, 2008. It was a big mistake on his part.
Now, it is a very interesting situation. It appears to me that both BMY and IMCL were not seriously prepared to the takeover events.
Now, IMHO, it is a war between BMY and ImClone and great opportunities for investors and lawyers.
OT Barrons
Yes, That's $2 Trillion of Debt-Related Losses
Nouriel Roubini, Economist and Professor, New York University
By ROBIN GOLDWYN BLUMENTHAL
LIKE THE EXHORTATIONS OF JEREMIAH TO THE NATION OF Israel before the first temple's destruction, the warnings of economist Nouriel Roubini fell on deaf ears. For the past two years Roubini, a professor at New York University, has cautioned about a huge housing bubble whose bursting would lead to a 20% drop in home prices; a collapse in subprime mortgages; a severe banking crisis and credit crunch; the near-failure of Fannie Mae and Freddie Mac , and a U.S. recession of a magnitude not seen since the Great Depression. So far, this latter-day prophet of doom has been on the mark, though time will tell about the recession part.
A Turkish native who grew up in Italy, Roubini trained at Harvard and later advised the Clinton White House, after his blog on the Asian financial crisis attracted the attention of Washington's economic and political elite. Roubini still publishes the blog -- the RGE Monitor -- and teaches economics at NYU's Stern School of Business. We caught up with him recently at his offices in lower Manhattan, and continued the conversation at Barron's. For his latest predictions, please read on.
Chris Casaburi
"A systemic banking crisis will go on for a while, with hundreds of banks going belly-up." --Nouriel Roubini
Barron's: Unfortunately for the rest of us, you have a pretty good track record. How much more misery lies ahead?
Roubini: We are in the second inning of a severe, protracted recession, which started in the first quarter of this year and is going to last at least 18 months, through the middle of next year. A systemic banking crisis will go on for awhile, with hundreds of banks going belly up.
Which banks, specifically, will fail?
I don't want to name names, but many, given the housing bust, will become insolvent. Their losses are mounting because they have written down only their subprime loans so far. They haven't started writing down most of their consumer-credit losses, and reserves for losses are much less than they should have been. The banks are playing all sorts of accounting gimmicks not to recognize them. There are hundreds of millions of dollars outstanding in home-equity loans that eventually could be worth zero, too.
So far, we have seen no recession in the technical sense: two consecutive quarters of negative growth in real GDP. Why not?
The definition of a recession isn't only two consecutive quarters of negative growth. The NBER (National Bureau of Economic Research) puts a lot of emphasis on things like employment, and employment has already fallen for seven months in a row. It also emphasizes income and retail and wholesale sales. Many of these things are declining.
Maybe the recession started in January; if you look at the data on gross domestic product on a monthly basis between February and April, GDP was falling. Saying this is not a recession is just a joke. Maybe instead of a 'U' recession and recovery, it will be a 'W,' with a rebound in the second quarter. But by the third quarter, the effect of the government's tax rebates is totally gone, because other forces on the consumer are more persistent and negative.
Which forces, for instance?
The U.S. consumer is shopped out and saving less. Debt to disposable income has risen to 140% from 100% in 2000. Hit by falling home prices, the consumer no longer can use his house as an ATM machine. The stock market is falling and (issuance of) home-equity loans (has) collapsed. We have a credit crunch in mortgages, and gas is around $4 a gallon. Everyone says, 'yeah, that's true, but as long as there is job generation there is going to be income generation and people are going to spend.' But for seven months in a row, employment in the private sector has fallen.
The most worrisome thing is that in spite of the rebates, retail sales in June were up only 0.1%. In real terms, they were down. If people were not spending their rebate checks in June, what will happen when there are no more checks?
Good question. How do you think Federal Reserve Chairman Ben Bernanke has handled the crisis so far?
The Fed's performance has been poor. More than a year ago the Fed said the housing slump would end, but it hasn't. They kept repeating this was a subprime-debt problem only, whereas the problems of excessive credit involve subprime, near-prime, prime, commercial real estate, credit cards, auto loans, student loans, home-equity loans, leveraged loans, muni bonds, corporate loans -- you name it.
The Fed's other mistake was to believe the collapse of the housing market would have no effect on the rest of the economy, when housing accounted for a third of all job creation in the past few years. When the proverbial stuff started to hit the fan last summer, the Fed went into aggressive-easing mode. But it has always been kind of catching up.
What should Bernanke have done a year ago, or even prior to that?
The damage was done earlier, beginning when the Greenspan Fed lowered interest rates in 2001 after the bust of the technology bubble, and kept them too low for too long. They kept cutting the federal funds rate all the way to 1% through 2004, and then raised it gradually instead of quickly. This fed the credit and housing bubble.
Also, the Fed and other regulators took a reckless approach to regulating the financial sector. It was the laissez-faire approach of the Bush administration, and (tantamount to) self-regulation, which really means no regulation and a lack of market discipline. The banks' and brokers' risk-management models didn't make sense because no one listens to the risk managers in good times. As Chuck Prince (the deposed CEO of Citigroup) said, 'when the music plays you have to dance.'
Now the regulators are attempting to make up for lost time. What do you think of their efforts?
The paradox is they're going to the opposite pole. They are overregulating, bailing out troubled participants and intervening in every market. The Securities and Exchange Commission has accused others of trying to manipulate stocks, but the government itself is now the manipulator. The regulators should investigate themselves for bailing out Fannie Mae (FNM) and Freddie Mac (FRE), the creditors of Bear Stearns and the financial system with new lending facilities. They have swapped U.S. Treasury bonds for toxic securities. It is privatizing the gains and profits, and socializing the losses, as usual. This is socialism for Wall Street and the rich.
So the government should have let Bear Stearns fail, not to mention Fannie and Freddie?
If you let Bear Stearns fail you can have a run on the entire banking system. But there are ways to manage Bear or Fannie and Freddie in a fairer way. If public money is to be put at stake, first all the shareholders of these companies have to be wiped out. Management has to be wiped out, and the creditors of Bear should have taken a hit. Why did the Fed buy $29 billion of the most toxic securities, and essentially bail out JPMorgan Chase (JPM), which bought Bear Stearns?
Because JPMorgan was a counter-party?
Exactly. The government bailed out everyone. Even the unsecured creditors of Fannie and Freddie should have taken a hit. Sometimes it is necessary to use public money to rescue institutions, but you do it in a way in which you're not bailing out those who made the mistakes. In each one of these episodes the government bailed out the shareholders, the bondholders and to some degree, management.
At what point does the government run out of money to lend to troubled banks?
Many public institutions are themselves going bankrupt. The FDIC (Federal Deposit Insurance Corporation) has only $53 billion of funds, and has already committed almost 15% of it to bail out depositors of IndyMac. The FDIC's deposit-insurance premiums weren't high enough, and now it is asking Congress to raise them. Plus, the agency claims only nine institutions are on its watch list. IndyMac wasn't on the watch list until June, the month before it collapsed. Studies done by experts in banking suggest that at least 8% of U.S. banks are in big trouble. Eight percent of the roughly 8,500 that the FDIC essentially is insuring equals about 700 banks. Another 8% to 16% also are shaky, so some 700 potentially are going bust and another 700 eventually could join them. Yet the FDIC is watching only nine institutions. It's a joke.
What recourse will the taxpayer have?
The taxpayer's bill is going to be huge. I estimate this financial crisis will lead to credit losses of at least $1 trillion and most likely closer to $2 trillion. When I made this analysis in February everybody thought I was a lunatic. But a few weeks later the International Monetary Fund came out with an estimate of $945 billion, Goldman Sachs (GS) estimated $1.1 trillion and UBS (UBS) $1 trillion. Hedge-fund manager John Paulson recently estimated the losses would be $1.3 trillion, and late last month Bridgewater Associates came up with an estimate of $1.6 trillion. So, at this point $1 trillion isn't a ceiling, it's a floor. And the banks, as I've said, have written down only about $300 billion of subprime debt.
How long will it take for the collapse in the banking sector to play out?
It is happening in real time. Many smaller banks are going bust already. More than 200 subprime-mortgage lenders have gone bust in the past year alone. And many community banks will go bankrupt. Community banks usually finance everything: the homes, the stores, the downtown, the commercial real estate, the shopping center. If you are in a town or a municipality where there is a housing bust, the bank is gone. Of three dozen or so medium-sized regional banks, a good third are in distress. That includes the Wachovias and Washington Mutuals of the world. Half of this group might go bankrupt. Even some of the majors could end up technically insolvent, though they might be deemed too big to fail.
Take Citigroup. In 1991 there was a small real-estate bust, though the quarterly fall in home prices was only 4%, based on the S&P/Case-Shiller indices. Citi was effectively bankrupt and signed a memorandum of understanding with the Fed that allowed the government to give the bank regulatory forbearance. Citi was allowed to ride it out and try to recapitalize in a few years, and thereby avoid bankruptcy protection. This time around the S&P/Case-Shiller indices indicate home prices already have fallen 18%. The decline could be as much as 30%, because the excess supply is huge.
Nouriel, have you always been so negative about everything?
No. I'm actually a pretty mainstream economist. I was trained first in Italy and then in the U.S. and earned my Ph.D. at Harvard. My interests are in international market economics and international finance, and I'm not a 'perma-bear' on the stock market nor an eternal pessimist.
Leaving aside the fact that we are going to have a pretty nasty recession and international crisis, the global economy is going to grow at a sustained rate once this downturn is over. There are significant financial and economic problems in the U.S., and that's why I'm bearish about the U.S. But the emergence of China and India and other powers is going to shift global economics and politics radically, and the world is going to be more balanced in the future, rather than relying on one engine, which has been the U.S. There are big issues ahead: How do you integrate the 2.2 billion Chinese and Indians into the global economy? There will be transitional costs and the displacement of workers, both blue-collar and white, in the advanced economies. But I'm quite bullish about the state of the global economy, and I'm positive about the medium and long term.
That's a relief. Thank you.
>Given this [Adnexus] purchase, do you think that there are any regulatory barriers/anti-trust issues in the BMY purchase of IMCL?<
No—I don’t expect any regulatory barriers whatsoever.
Followers
|
30
|
Posters
|
|
Posts (Today)
|
0
|
Posts (Total)
|
4764
|
Created
|
06/08/05
|
Type
|
Free
|
Moderators |
Volume | |
Day Range: | |
Bid Price | |
Ask Price | |
Last Trade Time: |