Friday, January 23, 2009
(Cont'd from above)...

Jim (cont'd):   

On the call, White made it clear that he is looking for something with several legs… that leans towards the medical device side of things… something that is less sensitive to reimbursement issues… so we went thru the companies that have collaborate partnerships with Abbott Laboratories (ABT*)… as they are the natural take over targets…. the ones that are most willing to get bought… think of this as like dating… Abbott Labs wants to get to know a company first… no speed dating here… thru a joint venture or other cooperative agreements before it proposes with a take over bit… who do I think would fit that bill… I have been thinking, its Celera Corporation (CRA)… Abbott and Celera… sounds like a comedy team… with Abbott definitely on first… Celera is a small company… it is an $8 stock… a market cap under a billion… under $700 million… so I want you to use limited orders and only buy in small increments if you are going to purchase one… if this jumps… you are just going to lose a point… I am just going to tell you that… so like you are immediately down, okay...

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Celera’s main business is cardiovascular lab diagnostics… and it’s working together with Abbott Labs to create molecular diagnostic products for personalized medicine… which is a medical practice that uses specific information about the patients… the high end stuff… I think it could be everybody at one point… everything from height and weight to gene and gene expressions to help treat that patient… personalized medicine requires a lot of diagnostic tests… and that is what Celera is working on with Abbott Labs… disease detection, assessing an individuals pre-disposition to certain diseases… monitoring the progression of a disease… and choosing the right therapy…. remember President Obama loves this stuff… because it saves money on health care costs down the line… Abbott knows this… heck, even Costello would know it… recently Celera and Abbott Labs agreed to modify their deal to increase it’s profitability… the two companies will pay each other royalties on the revenues generated from each others products… from the previous profit sharing structure… this renegotiated deal should lower Celera’s operating expenses… very important for these companies that burn a lot of money… and give the company some more flexibility to launch products that are outside of their joint venture with Abbott… that means even if they don’t enter into holy merger matrimony with Abbott… at least Celera should walk away a more profitable company… it is called palimony.

Of course, we don’t speculate on takeovers unless the fundamentals are sound… and Celera has a number of things going that make this stock worth speculating on… even if it never catches a bid… how about this product called KIF6... this is a test that predicts an individuals genetic risk for cardio vascular diseases… you know, that is a huge killer… the products at a revenue run right now just $10 million… it is about 10% of Celera’s current sales… I think that is going to be much bigger… I mean, I want to ask you something… who wouldn’t want to know about that kind of cardio vascular risk… other than the heartless John Thain… they are also currently rolling out a variance of KIF6... that can be used directly by doctors… thru a simple cheek swap… it is called StatinCheck, thru a directed physician campaign… Celera has made a few acquisitions of it’s own that are currently bearing fruit… in ’07 they bought a company called Berkeley Heart Lab… that sells personalized cardio vascular risk management programs… this stuff is going to be huge… including advanced lipid testing services… and another company called Adriage Genetics… which you will probably need after you have smoked an Altria cigarette… that is a line of products that help identify potential donors for bone marrow transplants.. in the most recent quarter Celera’s sales were up 123%… largely driven by those acquisitions… Celera has yet to turn a profit… but it does expect .20 cents per share… I think that is probably high… and that still puts it at a market multiple of 41 times earnings… that’s nose bleed, okay… seems fair considering that the company has the potential to deliver 50% earnings growth…but, you know look, in other times you would hedge fund managers willing to pay 80 times forward earnings on this kind of thing…. I do want to be very clear… on any other day of the week I would be reluctant to recommend a stock with that kind of multiple… especially in this environment… but it is speculation Friday… speculation Friday means taking big risk… it means that you can have a cooling off period of a couple of days to do the homework.

Of the companies that I think Abbott Labs might buy… I like Celera the most… there are some others though… Martek Biosciences Corp. (MATK)… a nutritional company with global leader in omega-3 and omega-6 fatty acids… could be a target… Martek’s main product is a type of omega-3 that is DHA… that has been approved by the FDA for use in baby formulas… I have always been waiting for this… as it provides benefits for infant brain and eye development… nutrition… Abbott Labs has a whole nutrition segment… it is a familiar business… if they are looking to grow Martek would give them a proprietary formulation in house… cost very little.

It is also possible that Abbott Labs could acquire Sequenom Inc. (SQNM)… now remember that was a speculative Friday on December 19th… recommended at $20... stocks up 24% since then… and this market right here, right now… we are ringing the register… why… because unlike John Thain, we can’t be too greedy… and no, I am not going to stop picking on that guy anytime soon… it is a core mission of mine.

Bottom line…

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The Bottom Line!:     If you want to speculate on the next take over in healthcare… I think the best buy for Abbott to buy is Celera Corporation (CRA).

Abbott Laboratories (ABT*) is looking to buy, and I think they could pick CRA, do your homework


[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    Recently you recommended Eli Lilly & Co. (LLY), Johnson & Johnson (JNJ*), and Bristol-Myers Squibb Co. (BMY*) as great pharmaceutical stocks. If you could pick one to start investing in right now, which one would it be and why?

Jim:    Lilly has a bit of a move, I still like the dividend… we absolutely endorse Bristol-Myers which I own for my charitable trust, ActionAlertsPlus.com, but I have to say that it is a little high, I would like to come in before I buy any more… which leaves it with the much hated, much disputed, much disliked, Johnson & Johnson (JNJ*)… I say the bear should go take a Tylenol or put a Band-Aid on it… I think JNJ should be bought… and bought aggressively… pull the trigger right now.

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Q:    I am calling about the Sunrise Senior Living Inc. (SRZ), would that be a good growth area? And which ticker should I be watching?

Jim:    No, I don’t like to see your living stocks… by the way… I had recommended selling that Sunrise Senior Living, holy cow, that was in the sell block… I mean like wow… I don’t like those stocks because you have got to sale your home… well, obviously you have got to sale your home in order to be able to move into them…and right now home sales they are not so hot… I do believe that housing will bottom later in the year… but it is too early to pull the trigger for any of those stocks.

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[verbatim recap]

[end of segment]

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