Magazine

Inside Wall Street


Is Bristol Ripe for a Buyout?

With the fundamentals improving at Bristol-Myers Squibb (BMY) and the stock spiraling down, the global drugmaker could be an enticing buyout target. Indeed, the company's huge sales, its array of products under development, and the shares' tumble to 19.78 on Oct. 29, down from 30 a year ago, make Bristol an "attractive takeover candidate" for drug giants (page 44) like Pfizer (PFE) or Sanofi-Aventis (SNY), says Jason Napolitano of Zacks Investment Research. French drugmaker Sanofi is Bristol's joint-venture partner in producing its largest-selling drug, Plavix, for the prevention of a stroke or heart attack. Plavix posted sales of $4.8 billion in 2007. Sanofi also helps promote Bristol's Avapro, a drug used against hypertension and congestive heart failure. Pfizer, Bristol's partner in developing Apixaban, an oral drug to combat blood clotting, is scouting for acquisitions. Napolitano, tagging the stock a buy with a 12-month target of 26, says the balance sheet is solid, with cash of $7.2 billion. And it anticipates cash proceeds of $1 billion from the sale of its 14.4 million shares in ImClone Systems (IMCL), expected to occur late this year. Bristol was outbid by Eli Lilly (LLY) in buying ImClone last month.

Tim Anderson of Sanford C. Bernstein (AB), who rates the stock outperform, says Bristol, a client, whose "earnings are likely to grow in the next four years," could "ultimately be a takeout candidate." Bristol-Myers declined comment.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Why PetMed Is Wagging Its Tail

PetMed Express (PETS) is riding the growing spending wave on health products for dogs and cats. Stock in the largest online pet pharmacy is running counter to the market's weakness, climbing to 16.52 on Oct. 29 from 10 in January. Sales remain strong despite the downturn, thanks to steady business from loyal customers.

Robust political spending has pushed general ad rates higher recently. But PetMed, a heavy online advertiser that also takes orders on an 800 phone line, has "successfully navigated a difficult ad market and delivered three quarters of solid financial results," notes Nancy Hall of investment outfit Ladenburg Thalmann (LTS), who rates the stock a buy. And she expects the uptrend in pet spending to continue. Hall sees PetMed earning 98 cents a share on sales of $217.3 million in the year ending Mar. 31, 2009, up from 82 cents on sales of $188.3 million in 2008.

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Helping Cut Health-Care Costs

The rising cost of health care is buoying American CareSource Holdings (ANCI), a little-known network that helps manage ancillary services such as lab work, dialysis, diagnostic imaging, chiropractic, and home health. Its stock vaulted to 7.32 a share on Oct. 29, up from 2.40 in February. The company is "one of our favorite ideas in any economic environment," says Constantine Davides of JMP Securities, (it has done business with the company). It's able to cut care costs by 15% to 30%, says Davides, who rates the stock outperform with a price target of 13. He expects CareSource to earn 16 cents a share in 2008 and 26 cents in 2009, vs. a loss in 2007.

The company provides sources of medical support services to regional insurers and smaller health plans. Says CEO David Boone: "We are part of the solution to the ever-rising cost of health-care services."

Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

Marcial writes the Inside Wall Street column for BusinessWeek. In 2008, FT Press published the book Gene Marcial's 7 Commandments of Stock Investing.


Best LBO Ever
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus