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Peach, if you're body's racked with septic, antibiotic resistant staph, are you going to turn down a synDNA cure because you don't want it in your body? Going to turn down a bird flu vaccine for a disease that is spreading from human to human? Doubt it.
Happy New Year to all!
Big, here's a portion of the story:
BARRON'S COVER
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Jack's Magic
By JONATHAN R. LAING
JACK WELCH, GENERAL ELECTRIC'S DEMANDING former chief executive, delighted in setting the bar high. When he stepped down a few days before Sept. 11, 2001, he left his successor, Jeffrey Immelt, the challenge of matching a remarkable string of years of strong profit growth.
What was most remarkable about those years, however, wasn't apparent to anyone outside the company until recently. The bar might have been set artificially high.
During the last five years of the Welch era, ended in 2001, GE's reported earnings jumped from 72 cents a share to $1.37, a rise of 65 cents a share, or 90.2% -- spectacular for a behemoth like GE. But without a massive under-reserving at its reinsurance unit, the company would have shown a cumulative earnings gain of just four cents, or 5.6%.
Ex-boss Welch, top, left current CEO Immelt with a big mess to clean up.
The under-reserving is expected to be completely corrected early next year, clearing the way for the unit's sale to Swiss Re. By the time that occurs, General Electric (ticker: GE) will have pumped in $9.4 billion in pretax dollars since 2001 to raise the reserves to an adequate level. When taxes are taken into consideration, the tab will come to $6.1 billion, or about 61 cents a share. And 61 cents would have all but torched the 65 cents of earnings gains in Welch's last five years.
Welch, whom Fortune crowned Manager of the Century in 1999, declined to speak with Barron's for this article. But certainly, the under-reserving boosted GE's earnings -- and Welch's reputation -- during the gun lap of his career. Immelt, forced to boost the reserves by billions over the past few years, has paid a heavy price in lackluster earnings growth.
In the Welch era, the reinsurance unit was known as Employers Reinsurance; later, it was renamed GE Insurance Solutions. Swiss Re announced last month that it is buying the bulk of Insurance Solutions for $6.8 billion in cash and stock. In a conference call, Swiss Re officials described both the $6 billion in reserve hits that GE had taken since 2001 and the additional $3.4 billion GE had agreed to add to finalize the transaction.
Swiss Re's Jacques Aigrain said the needed additions were "more or less entirely related to pre-2001 years, in both what they have done during the last few years [the $6 billion] and what we are asking them to do [adding $3.4 billion]...During the late 'Nineties, they had indeed gone into relatively large amounts of underwriting in business lines, which have been unpleasantly developing. Those include the traditional mix of some workers' comp, the developments related to various financial institutions and pharmaceuticals type of activities, and a variety of other accident-related activities."
Reserving includes an important time dimension. When a policy is issued, most of the first year's premium goes into reserves, because, for companies that reinsure "long-tail" policies like ERC, most claims probably won't show up for years. Such insurers provide coverage for risks -- such as those stemming from workers' exposure to potentially harmful substances like asbestos -- that are long-term. On the income statements of these companies, annual reserve provisions are by far the largest expense items. As they accumulate on the balance sheet, they dwarf other liabilities. Calculating proper reserves is tough; estimates hinge on shifting factors, such as the frequency and force of hurricanes.
Under-reserving temporarily can pump up earnings. But, eventually, sometimes years later, the piper must be paid. Calculating adequate reserves, as Warren Buffett once put it, is a self-graded exam.
GE officials contend that much of ERC's under-reserving was a result of industry-wide overcapacity and resultant cutthroat competition that led to under-pricing. They say a surge in big damage awards by juries and changing legal and regulatory definitions of liability played hob with estimates of proper reserves. "What you see in hindsight is the inherent volatility in reinsurance, and that's why we're exiting the business," says GE spokesman Russell Wilkerson. "GE leaders made thousands of business decisions in the late 'Nineties, and focusing on one business in isolation doesn't reflect the fact that the overall outcome of those decisions has been extremely positive for investors."
Cover Story -- Part II
OT...Schrod, we're going to take the train up to the foothills (12 hrs. from Calcutta), and then a jeep up to Darjeeling. The jeep ride is 2 1/2 hrs, and "toy" the train more like 6 hrs. You can do a shorter train ride once there, which we'll probably do.
This middle-man role is what I took it as from the initial reading. Hence my question soon after the PR: What's in it for GE? Do they get a finder's fee? A % of the grant? A % of future govt. funding steming from the original contact? So far, nobody's had a answer.
Did you read the current Barrons cover story on the legendary Jack Welch? Sounds like he cooked the books to bolster earnings growth by underfunding certain financial obligations to the tune of several billion. This is not deprecating the strength of the company, but according to the story, their earnings growth during Jack's rule would have been unimpressive had this not been done. JW himself would not be interviewed for the story. I doubt we've heard the end of it.
OT: Interesting read, bigworld. It's a warning shot that CYGX must haul ass because nobody's waiting on us to get funded and moving. If sickle-cell can be "cured" with RNA anti-sense, makes you wonder what can be done with synDNA. When do you leave for Africa? How high have you climbed in the past? In mid-January I'll be gazing at Kenchenjunga from the streets of Darjeeling, but my trekking days are over. Would rather be sipping the finest tea in the world in the comfort of my hotel lounge.
Question...what does GE Healthcare get out of this? Finders fee? A % of any grant? Any thoughts? Lets hope we don't get another law suit!!
Can't believe it either. GE. What a name to be associated with. LOTS of defence money sloshing around out there.
After that PR, I don't think we'll ever see the 80's again.
Tibb...I sold some trading shares last week at .89. Think I'll get back in under that?
Soldier, Brugges was one of my favorite places two years ago on our visit. Great beer, ambiance, and the best chocolate (we were there on Valentines' Day). Was even inspired to write a screenplay incorporating Brugges history, which I still have hopes for.
Small companies with a small float often split there stock in the $30 to $50 range. Companies with a large float, such as CYGX, more often seem to split in the $60 to $100 range (QCOM for example). Some choose not to split...eg GOOG. Depends on how much the company wants to encourage/discourage day-trading and small retail investors.
OT: Holy, if it was you who referenced that article on statin drug use, could you post it again, or anyone elso who remembers that post. TIA.
Happiest Holiday Greetings to all! Another milestone, I think, is that we crossed over into the $100 mil market cap category today. Have we done this before? ?Back in the $3 days? Also, with the run back into the $.90's, it will blunt year-end tax-loss selling. Still holding to my Sept. '06 price prediction.
The fermentation tanks are huge. One company that uses them bought them from a company in the mid-west that makes equipment for cheeze fermenting. Heard that on a radio interview several months ago. A module that you can mount on wheels like a coffee cart has got to impress the big pharmas.
Thimk how many you could put into a production facility!
More, I think we could get a $.90 close tomorrow. Trouble is too many traders/investors are already out for the Holidays.
JJ, was today's PR what you were referring to recently?
My contact at a well known large bio-tech in the San Diego area tells me again today that their production of fermentation DNA costs about $22K/gram. Then it must be sent out for further purification, which he says GREATLY increases the cost. The entire production process takes many months. He was very interested in today's PR. Will F/U with more details tomorrow if he gets back to me.
More, since all we know is what was in the PR, you can answer your questions as well as anyone. But, since the testing at Aldevron has been going on for quite a few months now, it would seem unlikely that the new module was used to produce the Aldevron tested synDNA. As for your second issue, the prototype module just means it was the first one built. Subsequent modules more than likely will need tweaking for various improvements. I would doubt the company would make such an announcement if there was any serious question about it working. Alfa Laval would not associate their name with a prototype that didn't work.
pshaw, please stand up and take a bow!
Totally disagree that this was a fluff PR. This is the FIRST time in the history of DNA-based medicine that synthetic DNA has been shown to work not just as well, but better than fermentation DNA. This discovery opens the possibility of mass immunizations against many diseases that kill millions every year, at a cost that would never be affordable with fermentation DNA. IMO this is Nobel Prize level science. The SP did not shoot up because Aldevron people already knew of the results, the science is too arcane for non-science people to appreciate, and CYGX is still a bare-bones operation with no visible means of support other than PP's.
Today's PR has made it to the DNAG board. Word spreading.
Would like to see a PR from the company about this...
Is that it for the law suit?? Nothing left? I wonder if pshaw's revelations about DL had anything to do with PP throwing in the towel?
Is this the first official mention of Bird Flu?
A one-two punch like that should put us into orbit. Today's news explains the price rise of the last two months. People at Aldevron had to be aware of these results a while ago. Lay investors are not likely to grasp the implications, but the bio pro's will. So will the big Pharma's. Glaxo, are you paying attention?
Fabulous news. Better than I had hoped for. Aldevron has to be practically joined at the hip with CYGX now. CHEAPER--FASTER--BETTER. Recipe for huge success.
hogger...better than a picture of a herpes cure hanging on the wall!!
Did you also notice that Percy's last post was 12/06? Coincidental??? He was so big on the patent thing, how could he have resisted the recent discussions? He would have been salivating.
There is a "poison pill" clause in place to prevent a hostile take-over, which I remember from reading one of the annual reports, but it would not apply to a friendly merger.
I have one patent for a medical device. It took 2 years. Something pertaining to cellular biology would certainly take longer. But the application listing should at least be discoverable.
Couldn't someone with a lawyer more or less call Malcomb and demand a response? It would seem to me to be a legal obligation of this company to verify/confirm the existence of these applications since a public announcement was made regarding them.
ot...looks like I got out just in time before gold took a big hit at noon. Any reason for this rush for the exit?
OT: tibb, what's the best way to chart gold prices? I've been in fidelity's gold fund for about 3 months, have made a nice return, but I know it can turn on a dime. I actually sold this AM when I saw what a sharp turn it seemed to take late last week. Long-term fundamentals look good with all the $$$ sloshing around Asia.
pshaw, you seem to be very talented at internet sleuthing. Why don't you try to discover something for us news hungry investors via the Aldevron connection?
Same here, pshaw. I'm at jschnei2@san.rr.com
Thanks
See if he wants to buy a bridge too! Great score!
With our established connection with the U of Pa., and possibly Beth Israel, could there be a flow-through of some of these funds to CYGX?
Could this be the cause of the run-up?
OT again...DNAP has an 8-K out today. Can you expound on it?
http://biz.yahoo.com/e/051125/dnag.ob8-k.html