September 2006 Archive
No one could possibly deny that Bernard (“Barry”) Sherman is a brainiac among brainiacs. The guy does, after all, have a doctorate in astronautics from MIT. He’s also the wealthiest CEO of a pharmaceutical company in Canada. But he’s best known today as the mastermind behind Big Pharma’s current Big Shakeup: Apotex, his generic drug company, snuck a generic version of Bristol-Myers Squibb/Sanofi-Aventis’ Plavix on to the market and was making a killing — until an injunction stopped distribution last week.
Apotex’s generic drug, clopidogrel, was released in August, before the expiration of the patent on brand-name Plavix, a widely used drug that prevents recurrences of heart attacks and strokes. Under certain conditions involving a patent dispute, a generic manufacturer is allowed a 180-day period to distribute its drug without intervention. Big pharma companies often buy off generic producers to ensure the generic version remains out of the public’s hands.
Sherman’s Apotex negotiated a typical settlement agreement with BMS/S-A, in which the latter would pay the former $40 million to keep its generic drug off the market. Sherman was so confident that the US Department of Justice wouldn’t approve the deal that he directed Apotex to begin manufacturing clopidogrel nearly a year in advance.
Sherman was right. When the government nixed the deal, Apotex was ready to distribute its version of the anti-platelet drug. It was a huge gamble on his part, but it paid off handsomely in sales and immediate market share. Sherman’s bold move also found a seam in the seemingly unbreakable glass wall that Big Pharmas have erected around their best-selling drugs.
However, the complicated story continues: The close of the month brought with it an injunction barring Apotex from distributing its generic, at least for now. Only Sherman knows whether he has any other tricks to pull out of his hat that will help his company come out on top. The good news is that BMS/S-A have pledged to lower the consumer cost of Plavix to that of the generic, for the duration of Plavix’s patent dispute anyway.
Despite nearly nine years as a business writer at Hoover’s, I still haven’t learned to love P&L statements or to wax rhapsodic about hedging strategies. But I do love stories about business people. Not the sensational “look-who’s-being-indicted-now” stories, but the stories of their lives, how they got to where they are.
One of my favorites was the Roger Lowenstein book Buffett: The Making of an American Capitalist, published in 1995. The story of the “Oracle from Omaha” absolutely fascinated me, despite the fact I’ll never be a significant investor (nonetheless a gazillionaire). The book made him just so human that I’ve been a big fan of his ever since.
So it was with great happiness I greeted last week’s news that Warren Buffett finally married long-time girlfriend Astrid Menks.
Buffett has always been known to do things his own way (witness his recent decision to give the vast majority of his fortune to philanthropy), so it was not really an overwhelming surprise that he would choose to celebrate the occasion of his 76th birthday by marrying Ms. Menks rather than playing pin the tail on the donkey.
(In June Buffett pledged a share of his fortune, earned at Berkshire Hathaway (see announcements on the company Web site), to the foundation created by Melinda and Bill Gates of Microsoft fame.)
To Mr. Buffett (one of the people who keep me interested in the business of business) I say: Good on ya for your decision regarding the disposition of your self-made fortune. To the happy couple I offer a wish for many years of wedded bliss to come!
I have covered the automotive beat at Hoover’s for a long time, and I can’t recall so much bad news from a single carmaker in a single month than what August 2006 brought for Ford Motor Company. Then, Tuesday, September 5, the company announced that Alan Mulally, former chief of Boeing Commercial Airplanes, is replacing CEO Bill Ford.
The following timeline should help illustrate Ford’s colossal Summer of Bummers — and perhaps explain what happened Tuesday:
August 2 – Monthly sales tallies for July revealed that Toyota outsold Ford on American soil for the first time in recorded history. Later that day Ford announced it had hired former Goldman Sachs veteran Kenneth H.M. Leet as an advisor to former CEO Bill Ford, sparking speculation that Ford is looking to unload Jaguar, Land Rover, and/or Ford Motor Credit.
August 15 – Its sales and market share pummeled, Ford announced it will cut its number of dealerships in 18 metropolitan markets. Proving that not everything that happens in Vegas stays in Vegas, Ford informed its dealers of the bad news the week before during their annual meeting in Sin City.
August 18 – In a sign that its Way Forward turnaround plan was Way Failing, Ford said it would slash its previously projected fourth-quarter North American production by 21% - or about 168,000 vehicles. Third-quarter production will also be cut by about 20,000 units.
August 24 – Smelling blood in the water, Sir Anthony Bamford, chairman of British construction machinery concern JC Bamford, said he would be interested in buying Jaguar so long as Land Rover didn’t come with the deal.
August 25 – Ford announced Robert E. Rubin had resigned from its board of directors citing a potential conflict of interest. Rubin is also on the board for Citigroup Inc. which Rubin said has a “…multi-faceted relationship with Ford.” To avoid the appearance of improprieties, Rubin stepped down. The same day the Rubin story broke, reports began swirling that former Ford CEO Jac Nasser, through One Equity Partners, a unit of JP Morgan Chase, might be interested in buying Jaguar and Land Rover. Nasser, of course, was fired by Bill Ford five years ago. As an added twist Nasser’s partner at Equity One is Jamie Rubin - Robert Rubin’s son.
August 26 – Citing a “source with direct knowledge…,” USA Today reported that Ford is planning to go private. Going private, while looking like a run-and-hide strategy, would get Wall Street off the company’s back, eliminate bothersome SEC-required disclosures, and generally free the company up to concentrate on not going out of business. But it would cost a ton of money. If Ford goes private or sells assets, Citigroup would almost certainly be involved in the financial machinations. Hence Rubin’s hasty departure?
August 31–To help it focus on more pressing matters, Ford announced that it is considering selling all or part of its Aston Martin luxury car unit.
Right in time for the buzz surrounding the first anniversary of hurricane Katrina, BellSouth distributed the new edition of its phone book to the citizens of New Orleans. The white pages are thinner – understandable, since the city’s population has been cut nearly in half. But there’s only been about a 2% decrease in individual business listings, according to an article by the Associated Press
It doesn’t take a séance at Marie Laveau’s grave to figure out that demo crews and roofers outnumber listings for beauty salons these days. But what about big business in the Big Easy? The Port of New Orleans, one of the largest ports in the US, has exceeded pre-Katrina levels of traffic, according to an article by Greg Flakus. BP, Chevron, ConocoPhillips, and Shell Oil have all resumed normal operations from their regional headquarters in the city. Wm. B. Reily & Co. (makers of southern favorites like Luzianne tea and Blue Plate mayo) suffered minimal downtime, thanks to the dedication and determination of its employees.
Sales from large retail outlets in the area, including Wal-Mart and Home Depot, have contributed to sales tax revenues that are stronger than the state had expected. Companies like Walgreen, Winn-Dixie, and Popeye’s, though still struggling to find enough workers, seem committed to help revive the area. Unfortunately, long-time NOLA native, International Shipholding, has announced that it will relocate its headquarters to Alabama due to the closure of the Mississippi River/Gulf outlet canal. Ruth’s Chris Steak House, which celebrated its IPO registration from its downtown NOLA office, has decided to make its temporary office in Florida permanent.
As politicians and journalist spend countless hours revisiting (and respinning) the social and political turmoil left in Katrina’s wake, it is clear that there is hope for the “city that care forgot.” FEMA may be a four-letter word, a muffuletta might come with bologna instead of salami (aka “the ghetto-letta”), and temporary trailers could replace elaborate floats in next year’s Mardi Gras parades. But when the last of NOLA’s people return, there will be jobs, supplies, crawfish etouffée, and another losing season of Saints football waiting for them.
I’ve been taking a “wait-and-see” approach to my coverage of the planned IPO of Industrial and Commercial Bank of China (ICBC), and of the Chinese financial services industry in general. This is in stark contrast to the frenzied activity (make that “foaming at the mouth”) of the international financial services industry where China is concerned.
As one of my colleagues so aptly put it, “Citigroup, HSBC, Goldman Sachs, et al., are falling over one another to get into the Chinese banking game.” So true. Almost every morning brings a fresh story in the international business news about this firm or that firm committing to buy a stake in or set up a JV with a Sino counterpart. Just to pluck a few random examples, Commonwealth Bank of Australia, Fortis, and Sun Life all made the papers in August with new deals or hoped-for deals. Other big players in the “Eastern Gold Rush” include Bank of America and Temasek, an investment firm controlled by the Singaporean government.
There’s certainly some validity to the industry’s excitement. Outside of institutions in formerly closed markets (like China), it seems there’s hardly a bank in the world that hasn’t merged, unmerged, and remerged several times. The opening of China’s financial institutions to the international industry is undoubtedly the biggest Big New Thing to happen in ages.
And, of course, the frenzy isn’t restricted to the financial services industry. A quick look at other industry sectors shows a lot of investments traveling eastward. What’s truly fascinating is how much is riding on China’s ongoing banking reform program and the continuing integration of the country into the global economy.
It’s likely there will be some serious missteps along the way. Some investors (both in China and elsewhere) are liable to get hurt. Some companies could fail or require protection to recover. But one thing’s for sure: The next few years are bound to be very interesting as East and West rush to meet.