Randomly Noted

One of the more popular newsletter writers/blogger in the FX world is John Mauldin. His most recent newsletter contains yet another sober view of the economy. Mauldin always tries to take a forward view of the world and in this newsletter, he keeps to form. He takes a look at why the recent soft GDP numbers will be, well, soft in quarters ahead. He warns that voters should be careful for what they wish for in this election season regarding deficit reduction and campaign promises that will be hard to keep. And he offers a sharp look at the effect the upcoming expiration of unemployment benefits will have on personal income. A good read all around.

Genzyme's stock has significantly underperformed the Nasdaq since the beginning of last year

Stocks in general took a clobbering in 2009. Genzyme’s stock performance was a downright mess (see the above chart) – attracting activist Carl Icahn who has recommended a slate of directors to sit on the Genzyme board and cook up ways to enhance shareholder value. Genzyme has decided to take matters into its own hands.

Today it unveiled a five-prong plan to increase shareholder value but it really boils down to doing two things – implementing a $2 billion share buyback and putting on the block its diagnostics and pharmaceutical intermediates business.

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A couple of top Alliance Boots executives were here today, and amid happy talk about the company’s good fortunes was this newsy tidbit: during the depths of the global economic downturn, women bought more mascara than ever. Why mascara? Ornella Barra, chief executive of the company’s pharmaceutical wholesale division, said it was “psychological.” Women wanted to feel positive about themselves, even as they or their husbands were losing jobs. Mascara was a quick, easy and inexpensive way to perk themselves up.  Generally speaking, Boots drug stores – a U.K. retailing mainstay- benefited as people “traded down” to the firm’s “Boots” brand of mid-price health and beauty products, said Stefano Pessina, Alliance Boots’ executive chairman and co-owner with Kohlberg Kravis Roberts, the private equity firm. “Boots” products are now available in the U.S. in Target stores, and so far, Pessina says, his company is “reasonably happy” with this arrangement.  He sees the Target relationship evolving so Alliance Boots has “better involvement, better control of what happens in the store.” Separately, the company is seeking opportunities to expand its health-and-beauty wholesale distribution business and thinks the sector is ripe for partnerships, mergers and acquisitions. It’ll be “a few years” – and some significant debt repayments – before Alliance Boots goes public, Pessina said. Chatting with Pessina, it becomes clear he “gets” what drives U.K. customers’ loyalty to Boots: clean, inviting stores (in contrast to the grungy, poorly lit venues Americans are used to); store brands – “Boots” and a new “Boots Laboratories” line – which have a proprietary, rather than cheap, vibe; and the need for a motivated, specialized sales force (as opposed to apathetic clerks who can make the shopping experience a drag.) Pessina is a realist about the company’s ability to expand its retail footprint: Stand-alone Boots shops (complete with pharmacies) won’t dot the global retailing landscape any time soon, he says. He seems to be placing his bets on 1) selling more Boots brand products via retail partners around the world; and 2) expanding the wholesale business.  ”It’s possible to find the right mergers” in the latter industry, he told us.

If you asked a trader in U.S. stocks at the beginning of this week what the main catalysts would be for price action, it’s unlikely you would have been told an Obama administration plan to separate banks from their trading activities and limit their size would turn out to be a big one.

Another factor: the unlikely election of a Republican to a Massachusetts Senate seat, changing the balance of power in the U.S. Senate and changing the outlook for health care reform legislation, among other things.

Oh, throw in a deterioration in the position of Federal Reserve Chairman Ben Bernanke’s standing in the Senate, where he needs approval to carry on with his responsibilities passed the end of this month.

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Novartis is paying Nestle $180 a share for the chocolate company’s stake in Alcon; the drug maker is offering a measly $153 a share to Alcon shareholders for the remaining 23% it won’t own. Can they conjure up a winnable legal case against Novartis’s gambit to force a higher price? Perhaps. With 25% of Alcon already in hand, Novartis’s deal with Nestle will bring its stake to 77%. CEO Daniel Vasella, cites Swiss law (all three players are incorporated in Switzerland) in maintaining he doesn’t need the approval of Alcon shareholders to secure dominant ownership of the eye-health company. He’s probably right on the legal details – but here’s guessing he’ll boost his offer to Alcon shareholders a tad, if only to avoid making too many enemies among institutional investors.

Let’s hope Nebraskans’ aversion to the cringe-worthy pork-barrel politics of Sen. Ben Nelson ushers in a new American politics this year – one where self-interest is sidelined and the national interest prevails. You may favor the Democrat’s health reform project, you may oppose it – you may, like many people, be uncertain. But it’s hard not to be repelled by the small-bore thinking that got healthcare legislation through the Senate in a pre-Christmas holiday scramble. That the people of Nebraska are put off by the Senator’s politics – forcing Nelson to justify his actions - suggests the intellectual independence of the American people has survived a generation of some of the crassest politicking on both sides of the aisle. If you’ve watched Nebraska politics for as long as I have (26 years and counting), Nebraskans’ reaction to the sweetheart deal Nelson secured for the Cornhusker State isn’t entirely surprising. This is a largely pro-GOP population which nonetheless routinely elects Democrats to the highest offices – some of them free-thinking types such as Bob Kerrey. Nebraskans’ feisty political independence has roots in 19th century prairie Populism. We may well see a (hopefully benign) 21st century Populist variant spread across the U.S. as Americans come out of the funk of severe economic recession and regain their confidence and convictions. Continue reading…

Sanofi-Aventis’ $1.9 billion acquisition of Chattem, a maker of over-the-counter lotions and potions, is the latest move by a big drug maker to embrace the steady returns of low-tech medications. It’s quite a switch from the conventional wisdom of just a few years ago, which posited that drug makers should run, not walk, away from everyday drugstore staples. One after another sold off their anti-bacterial mouthwashes and diaper rash creams. They did so  in order to focus on science-based discoveries to fill their new-product pipelines and thereby prove to investors they could deliver so-called blockbuster cures for dread diseases that afflicted many. The times have changed. To be sure, from a scientific standpoint, the Golden Age of Biology continues as researchers the world over revolutionize our understanding of – for want of a better word – life. But in the mundane world of balance sheets and market valuations, drug makers simply can’t afford to bet big on science because it’s expensive and risky, and too many recent discoveries have either failed or have been too similar to existing drugs to warrant hefty price tags. To be sure, CEOs such as Novartis’s Daniel Vasella still speak eloquently about breakthrough drugs, yet they’re increasingly gravitating to safe ventures. Novartis itself has long been a champion of generic-drug production. For many years, it was just about the only major pharma company which produced generic versions of its off-patent prescription medications. Now, some of its competitors, such as Pfizer and GlaxoSmithKline, are diving into generics to reap their safe, steady revenue stream. Just last year, Pfizer set up a unit specifically to focus on the business for the first time. The Sanofi-Chattem deal speaks volumes about the current state of affairs in the pharmaceutical industry: Chattem brings to the Paris-based drug maker a number of products it acquired when giant Pfizer sold its cupboard of staples to Johnson & Johnson, which then had to divest of certain items to meet anti-trust concerns. As Pfizer subsequently encountered difficulties generating high-tech blockbusters to replace those losing patent protection, it came under fire for having walked away from those very same steady-earning staples. The recent Pfizer-Wyeth deal brought a number of over-the-counter products back to the Pfizer medicine cabinet. Ironic, eh? (My colleague Jacob Goldstein has a nice blog on this subject; have a look.)

The extravagant courtship of Nebraska Sen. Ben Nelson which produced today’s Senate passage of the Democrats’ health reform bill isn’t the first time the thinly populated state has played a disproportionate role in a crucial policy debate. In May 1985, Sen. Ed Zorinsky cast the key vote in President Reagan’s landmark budget-reduction bill. A young reporter in the Washington, D.C., bureau of The Omaha World-Herald, I covered the Republican majority’s courtship of Democrat Zorinsky and the subsequent ”thank you’s” he received from Reagan and then-Vice President George Bush, who, by the way, invited the Nebraskan to switch parties. (He declined.) Zorinsky, who died two years later, was a more independent thinker than Nelson. By backing the Reagan Republicans, Zorinsky placed his fiscal principles above partisan politics - Cornhusker Democrats have always been a conservative bunch. That said, Zorinsky’s “yes” vote didn’t come without a price; the quid pro quo he secured from the GOP came in the form of a fatter  federal farm bill. Similarly, Nelson has won a passel of pork for Nebraska, a sprawling state with a tiny population, by casting the deciding healthcare vote – this, even as the Democratic majority also caved to Nelson’s attacks against federal abortion funding. Continue reading…

Newsday’s Walt Handelsman takes a look at the healthcare debate in his usual clevel, offbeat way. Click here to see the video or click on the image above.

In the 1990s, drug maker Novartis AG introduced a potent cancer drug named Gleevec; its powers have been chronicled by grateful patients ever since. Now comes further evidence that Novartis has a successor drug which may even be superior to the original. Called Tasigna, it worked better than Gleevec in a clinical trial. A reticent Novartis says only that Tasigna produced “faster and deeper responses” than Gleevec in adult patients newly diagnosed with chronic myeloid leukaemia. The drug maker’s No. 2 best-selling medication, it’s likely to generate $4 billion in sales this year; revenues are still rising at around 10% annually. The problem for Novartis is Gleevec will lose patent protection in 2015, at which time it will face competition from low-cost knock-offs. This may seem far into the future but for a pharmaceutical company it’s tantamount to tomorrow. Replacing billions of dollars in lost revenues requires many, many years of new-drug development. Tasigna would therefore appear to be a knight in shining armour – both for Novartis and for patients.