TODAY’S FAYRE – Tuesday 22nd April 2014 – ASTRA, GSK & MOYES!

TODAY’S FAYRE – Tuesday 8th April 2014

“From childhood’s hour I have not been
As others were; I have not seen
As others saw; I could not bring
My passions from a common spring.
From the same source I have not taken
My sorrow; I could not awaken
My heart to joy at the same tone;
And all I loved, I loved alone.
Then- in my childhood, in the dawn
Of a most stormy life- was drawn
From every depth of good and ill
The mystery which binds me still:
From the torrent, or the fountain,
From the red cliff of the mountain,
From the sun that round me rolled
In its autumn tint of gold,
From the lightning in the sky
As it passed me flying by,
From the thunder and the storm,
And the cloud that took the form
(When the rest of Heaven was blue)
Of a demon in my view.”

Edgar Allan Poe – poet – 1809-1849

The fact that Manchester United ‘binned’ David Moyes this morning won’t come as any particular surprise; it was always going to be a gargantuan challenge, climbing snuggly in to Sir Alex Ferguson’s boots. From humble beginnings at PNE, David Moyes built a tremendous reputation as a journeyman manager with a very limited budget at Everton, with the parsimonious Bill Kenright keeping a vice-like grip on the purse strings. Within those parameters Moyes did a great job, though Everton never really looked like breaking through in to the big league.
Sir Alex Ferguson surprised many by anointing Moyes as his successor. Unfortunately Moyes does not have Ferguson’s gravitas and charisma. Apart from Juan Mata, Moyes failed to sign a decent world class player! It was a question of David Who? It just goes to show how important over a long period of time Sir Alex and David Gill the CEO, were as a double act!

The Glazers are not exactly known for philanthropy when it comes to Man Utd. The Club is a cash cow for them. They need income to service their debt of their Florida operations. Losing, even for a year, Champions League status is bad news. Van Gal or Klopp step up to the plate please! However sorry we feel David Moyes will be seen blubbing all the way to the bank with a sack-full of loot! His family will never have to worry again! I’d take that!

The Street of Dreams does not do Easter Monday. However it was rather a reflective session with some 2nd quarter results such as Halliburton helping to provide some impetus. The DOW closed up 0.25%, the S&P 500 +0.38% and the NASDAQ cracked on by 0.64%. If Netflix’s encouraging results – profits up 30% from its 48 million members in 40 countries – been posted before the bell, I suspect the NASDAQ would have been even higher. Netflix also added 2.2 million subscribers in the last quarter and they will be increasing their charges. Netflix shares rose by 7% after hours. Ford is rumoured to be replacing Alan Mulally as CEO with Mark Fields at the end of the year. Mulally is accredited for Ford’s dramatic recovery in the last 5 years.

There was a neutral start to the session in Asia, with most bourses making little progress. There was concern that Japan’s trade gap had widened 4 fold last month from Y356 billion to Y145 trillion, thanks to the Yen falling 10% in value against the Greenback in the last year, higher energy prices (petrol 8% & gas 4%). Imports were up 18% in March and exports up a miserly 1.8% in March. Consumer spending has its limitations in Japan due to the small dwellings people live in.

Panmure’s Savvas Neophytou makes poignant comments on Pfizer/Astra Zeneca.

“Weekend press reports on possible bid by Pfizer – To us this is relatively far-fetched, BUT maybe there is something to it as the Sunday Times quotes various unnamed sources. It seems to us that stories of an AZ takeover like this come up once a year. Usually regarding Novartis and/or GSK machinations and given AZ’s imminent descent down its patent cliff and reliance on relatively unproven pipeline for its long-term future, perhaps some shareholders might be tempted to accept £46-50 per share. Pfizer’s motivation is not so clear on the other hand. Cash repatriation sounds too opportunistic a motive and its shareholders will likely take a dim view of such an about turn in strategy. Pfizer has in fact recently been demerging rather than bulking up so not entirely convinced how tangible this interest is. Also press reports point to bid been made when AZ was trading at £30, with only 20% premium on offer so a bid of £50 per share might not be meeting the return criteria for Pfizer shareholders. That said, I would suggest that as AZN is morphing from a pharma/major to a discoverer/producer of niche-busters and its business model is now more biotech-like (particularly with cancer immunotherapies and biological pipelines). This potential approach would be highly opportune and timed right when the company is in the middle of its transformation. Given that major shareholders will be backing management to execute on its business plan and new strategy then shareholders will require a very high price to accept a bid now – certainly more than was trailed in the press over the weekend. Astra’s shares were up 7.5% at 8.30am this morning – TAKE PROFITS!”

There was a much more tangible story from the international drug sector with Switzerland’s Novartis and the UK’s GlaxoSmithKline agreeing to exchange assets and combine their consumer healthcare units. Novartis will acquire GSK’s oncology drugs business for $16bn (£9.5bn) and sell its vaccines division, excluding the flu unit, to GSK for $7.1bn.
In a separate deal, Novartis has agreed to sell its animal health division to Eli Lily for nearly $5.4bn. Novartis seem focused on its key businesses. In recent times growth has been sluggish. Consequently Novartis and GSK, by combining their over-the-counter (OTC) units would help boost the fortunes of both the companies, with total sales of £6.5bn. With my diseased ridden mind working overtime, one wonders if this interaction is a start to a truly flourishing love affair. GSK shares up 3.5%.

This morning in the US the following post numbers for the 2nd quarter – UNITED TECHNOLOGIES, McDONALD’S, HARLEY DAVIUDSON, LOCKHEED MARTIN, AT&T and AMGEN. At 9.10am the FTSE 100 was up 53 points thanks to the drug frenzy at 6628

These are David Buik personal views

Twitter – @truemagic68

David Buik

Market Commentator

D +44 (0)20 7886 2775
Panmure Gordon & Co
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