GlaxoSmithKline: The Unluckiest Pharma Company in the World

GlaxoSmithKline (GSK), the world’s second-largest drug maker, just can’t seem to catch a break.

It appears the Swiss pharma giant can do nothing right these days. First, there was Advair, the asthma drug that worsened the condition with prolonged use, then there was Avandia, the diabetes drug which has been shown to cause heart attacks. Now, there is GSK’s vaccine for the diarrhea-inducing virus Rotarix. The vaccine was found to contain traces of the supposedly innocuous pig disease called porcine circovirus.

Several governments have advised their doctors to avoid treating patients with the drug until the risk of the unintended ingredients can be determined. Switzerland is the most recent country to issue a cease and desist order. The company spokespeople insist this is only a temporary precaution, and that those who have already been inoculated with the drug have nothing to fear. Stay tuned for further mishaps from GlaxoSmithKline, we predict their heavy-hitter, Tums, will be shown to cause indigestion and heartburn.

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Pfizer and GlaxoSmithKline in deal to supply low-cost vaccines

Pfizer and GlaxoSmithKline will supply hundreds of millions of doses of their pneumonia vaccines to the world's poorest countries at heavily discounted prices under a novel agreement, reports the New York Times.

The deal was announced by the Gavi Alliance, a non-profit organisation, which estimated the program could save a total of 900,000 lives by 2015 and up to seven million lives by 2030.

Pneumococcal disease not only kills small children but also maims, leaving survivors with high rates of mental disability, seizures and deafness, says Sarah Boseley in the Guardian. She continues: "There's no doubt about the good that such a vaccine can do. But there will continue to be questions about the way the deal has been done, not least because it is the first of its kind and sets a pattern for the future".

Pfizer and GlaxoSmithKline will provide up to 300 million doses each of their vaccines over a 10-year period under the new agreement. The price for the first 20% of the supply will be $7 a dose. Then the price will drop to $3.50 a dose for the remainder. The vaccines would be paid for by donations raised by Gavi and by the governments of the countries that ordered the vaccines. In Western markets, the pneumococcal vaccines sell for $54 to $108 a dose.

"For the price of a Starbucks latte, developing countries are going to be able to buy a dose of a life-saving vaccine," said Orin Levine, director of the international vaccine access center at the Johns Hopkins Bloomberg School of Public Health, who has worked with GAVI.

The NYT reports that officials involved in the deal say that it historically took many years for a vaccine developed in the West to trickle down to developing countries. But the new program would make the first vaccines available to Africa this year.

"American kids and African kids will get this new vaccine in the same year," Dr. Levine of Johns Hopkins said. "That's just never happened before."

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Conoco to halve its 20 percent stake in LUKOIL

ConocoPhillips said it plans to halve its 20 percent equity stake in Russian oil major LUKOIL as part of a program to boost returns and reduce debt.

Conoco, which has big exposure to a weak refining market and is challenged by exploration and production assets in North America that are tilted toward less-profitable natural gas, lags its oil major peers in returns.

ConocoPhillips released a bare-bones plan to revive its finances five months ago, which included the sale of $10 billion in assets.

At the time, investors and analysts speculated that Conoco might sell part of its stake in the Russian oil major and last week Reuters reported that Conoco had decided to do so.

It is "more appropriate" for the company to use proceeds from part of its LUKOIL interest to increase shareholder value, Jim Mulva, Conoco chief executive, told the company's annual meeting with analysts. But he also said it was important for the company to remain in Russia.

LUKOIL was the most likely buyer of the 10 percent stake, which is worth $4.9 billion, analysts at Raymond James said in a research note.

LUKOIL Vice President Leonid Fedun told analysts in London that his company would not rule out buying the shares being sold by Conoco, but added that the Kremlin could oppose such a move.

Conoco said potential dispositions in 2010 include its interests in the Syncrude oil sands project and the Rex pipeline, 10 percent of its Lower 48 and Western Canada portfolio, and its remaining gasoline retail operations.

About half of the assets will be sold in 2010, and the remainder in 2011, the company said.

The company also said it plans a $5 billion share repurchase program and will raise its dividend 10 percent.

The third-largest U.S. oil company said it expects per share production growth of 3 percent in 2010 and 2011 and 3 percent to 5 percent in subsequent years.

At 1600 GMT, the company's shares were up 7 cents, or 0.1 percent, at $52.58 on the New York Stock Exchange.

LUKOIL's Fedun said planned tax breaks in Russia meant its cash flows could rise and that the Kremlin could object if this money was spent buying back the shares.

"The political leadership of the country may see it negatively," he said.

He added that any purchase would depend on LUKOIL's other financial obligations and said he himself would not buy the shares. Fedun already owns 9 percent of LUKOIL.

LUKOIL, Russia's No. 2 oil producer missed forecasts when posting a 23 percent drop in 2009 profit on Wednesday.

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Buffett's Berkshire Hathaway continues to dump Moody's stock

Warren Buffett continues to show that he's no longer in the mood to be a Moody's investor.

Buffett's Berkshire Hathaway reported additional sales of the credit rating firm in an SEC filing Monday. Berkshire has reported such sales at least a half-dozen times in the past year and seems on its way to liquidating the entire stake.

The latest filing reported that Berkshire sold 815,905 shares last week. That raised about $24 million for Berkshire, mere pocket change.

Berkshire still owned about 31 million shares of Moody's Corp. as of the filing.

Berkshire is required to report the transactions within two days of their occurrence because it owns more than 10 percent of the company's stock. Once that ownership level falls below 10 percent, which it seems nearly certain to do, Berkshire will no longer have to update its sales each time they're made.

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GlaxoSmithKline makes vaccine executive changes

British pharmaceutical company GlaxoSmithKline PLC on Friday announced two changes in the executive lineup of its vaccines business.

Jean Stephenne was appointed chairman of GSK Biologicals with immediate effect. He will also continue in his current role as president of GSK Biologicals.

Over the next two years, Glaxo said, operational responsibility will be taken over by Dr. Moncef Slaoui, who will also continue as chairman for research & development.

"Jean has built a world-leading vaccines business and as chairman will continue to be instrumental in driving forward our public health agenda," said Chief Executive Andrew Witty.

"Moncef has more than 17 years experience working in the vaccines area and has played a critical role in developing the strong pipeline we have today. These changes will ensure continued strong focus on delivery and development of this pipeline."

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Growing transportation demand suggests global freight recession over: United Parcel Service

United Parcel Service (NYSE:UPS) and logistics firm Expeditors International (Nasdaq:EXPD) have indicated that strong air freight growth last fall continued through at least January.

A recent surge in demand for rail, truck and air transportation suggests the global freight recession may have ended, industry analysts said Friday.

After bottoming out in the second quarter of 2009, demand has materially strengthened over the last four weeks, says a report from UBS analysts Rick Paterson and Fadi Chamoun.

The International Air Transportation Association recently revised its outlook, saying cargo volumes should increase by 12 per cent in 2010. That's up from seven per cent in earlier forecasts.

The Port of Long Beach says its container traffic grew by 30 per cent in February from last year.

The American Trucking Association said its seasonally adjusted truck tonnage index was up 1.9 per cent in January.

Railways in Canada and the United States saw their non-coal volumes increase over the last week from a year ago.

Total carloads grew by 13 per cent to 739,292, the highest level since November 2008. They are also up 3.5 percentage points from the previous week.

Carloads were down 9.8 per cent from 2008 but things are at least moving in the right direction, added Walter Spracklin of RBC Capital Markets.

Canadian railways were ahead of their U.S. peers, with carloads up by 20.5 per cent compared to an 11.4 per cent increase south of the border, he said in a report.

Canadian carloads improved 9.5 percentage points from the previous week, while U.S. carloads were up 2.2 percentage points.

Canadian National Railway's (TSX:CNR) carloads grew the most, up 23.8 per cent over the week, compared to a group average increase of 13 per cent.

So far this year, its carloads are up 13.4 per cent.

At Canadian Pacific Railway (TSX:CP), carloads increased by 5.3 per cent during the week and five per cent for the year to date. Intermodal traffic grew by 19.2 per cent for the week but is down 0.9 per cent year to date.

Overall Canadian volumes were driven by an 86-plus per cent surge of gravel and metallic ores. Chemicals were up 34.3 per cent and automobiles 42.5 per cent.

Grains decreased by 5.7 per cent in the week. Pulp and paper products were down marginally but lumber was up 13.6 per cent.

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GE Capital, Navistar Partner On Truck Loans

General Electric Co.'s (GE) financing unit will provide customer loans for commercial truck maker Navistar International Corp. (NAV), giving Navistar the ability to finance larger truck fleet purchases.

The partnership between the two companies, which will be called Navistar Capital, will effectively transfer Navistar's retail-level lending operations from its finance subsidiary to General Electric Capital Corp. The new venture will commence in about 90 days, the companies said Tuesday.

About 60 Navistar Financial employees who support its retail lending business will join GE Capital to manage lending under the new venture, the companies said. Navistar Financial, meanwhile, will continue to provide financing for truck purchases by the company's independent dealers.

The two companies declined to divulge how much money GE Capital is committing to Navistar Capital or the details about profit-sharing between the companies. The agreement announced Tuesday will run for three years, followed by one-year automatic renewals that will run indefinitely.

Navistar Financial has been providing customer loans totaling $1 billion to $2 billion a year. The company's traditional focus has been on small and medium-sized trucking companies that have limited credit options elsewhere.

But Navistar has been under pressure in the past year to expand its lending volume as large trucking companies look to the company for purchase financing as they replace their truck fleets. Tighter credit standards have put bank loans off limits for many of these companies, prolonging a sales slump in the commercial truck industry that began in 2007.

Navistar said the ability to provide in-house financing for large truck deals will make the Illinois company more competitive with rivals such as Daimler AG's (DAI, DAI.XE) Freightliner truck line and Paccar Inc. (PCAR).

GE Capital has provided financing for Navistar's customers in Canada for the past 25 years. The Connecticut company also has similar partnerships with other equipment makers, including for the Bobcat-brand of compact construction equipment. GE Credit operates about 40 commercial lending programs across a variety of industries.

Navistar noted that the infusion of capital from GE will allow Navistar to expand its financing options, particularly a lease-to-own program for trucks buyers. Navistar Capital also is expected to strengthen Navistar's balance sheet by lessening Navistar Financial's reliance on borrowing to generate capital for loans.

"The deal is a mild positive for Navistar," said Gregg Lemos Stein, a credit analyst with Standard & Poor's, in a written statement. "We believe the alliance will reduce the risk of heavy funding requirements at Navistar Financial Corp."

Navistar, which has a below-investment-grade credit rating, has been an active issuer in the public market for asset-backed securities. Navistar Financial in January was in the market with a $250 million equipment bond for dealer financing. The security is eligible for financing under the Federal Reserve's Term Asset-Backed Securities Loan Facility, which is intended to rejuvenate the consumer loan-backed market.

Bill McMenamin, vice president of Navistar Financial, predicted the company will lessen its exposure to the asset-backed market once Navistar Capital takes over customer lending.

"Navistar Financial will become a smaller, but more conservatively financed company," he said.

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