A San Francisco-based PM recommended a short on Monster Worldwide (NYSE: MWW, $11.73) at a Roulston Research idea forum back on June 14.  The company reported Q2 results earlier this week.  The quarter was weak, considering Hotjobs numbers were now factored in.  MWW guided for in-line Q3 EPS and revenue below consensus, sending the stock down significantly.  The presenter believes the company will find it difficult to meet the full year forecast.

Roulston Research Partner Ross Rubin recently created a blog posting that outlines the recent developments with Spotify and Hulu. Hulu has been very popular in the United States as a website and subscription based service that offers on-demand streaming video of movies, television shows, and other features. Hulu offers two tiers to it’s consumers which are a traditional free advertisement based offering and a premium service. Hulu Plus is the premium based service that offers subscribers unlimited access for $7.99 a month.

In contrast to Hulu, Spotify has been very popular overseas and just recently became available in the United States. It is a Swedish-based music streaming website that offers a range of music from record labels that are both major and independent. Spotify offers three tiers which are its free, unlimited, and premium offerings. The unlimited offering gives users access to all of it’s streaming music with no advertisements for $4.99 a month and the premium package includes those two features along with offline mode for playlists and mobile phone accessibility.

Ross has more than 16 years of experience analyzing consumer technologies. Prior to founding Reticle Research, he was executive director and principal analyst at The NPD Group, where he provided analysis on a wide range of technology topics to clients and helped to launch several research products. Before NPD, Ross founded and developed the consumer access and technology service at Jupiter Research, where he served as vice president and chief research fellow. Ross is a senior columnist for Engadget, where he has written the Witched On column since October 2004, and a columnist for ABCNews.com and Tecca, where he writes Rubin’s Roundup. Ross has appeared on ABC, The Today Show, CNN, CNBC and Fox News and is frequently quoted by media outlets such as The New York Times, The Wall Street Journal, Bloomberg Businessweek, San Jose Mercury News, Associated Press and other leading publications. To learn more about Reticle Research please visit http://www.reticleresearch.com/.

A New York-based portfolio manager recommends shorting Flextronics (NASDAQ: FLEX, $6.72).  The company generates 10% of its revenue from sales to RIMM, whose troubles have been well-documented.  A number of other end markets that combined account for 45% of Flextronics’ sales are showing weakness as well, networking in particular, with Cisco having issues in its core business.  The company’s exit from the PC ODM business will boost profitability, but may result in losses of other services at existing ODM accounts, such as Hewlett-Packard and Dell.  Switching capacity to other uses may prove to be problematic as well, due to sluggish tech spending environment and high inventories.  The presenter believes FLEX is a good shorting opportunity at this level considering weak guidance and likely EPS revisions by the  Street.  The upside for the short is 20-40%.

Roulston Research Energy Partner John Hofmeister recently appeared on CNBC to talk about the ramifications of the IEA’s announcement to release 60 million barrels from its oil reserves to lower oil prices even though they have been consistently rising over the past month. The United States supports IEA’s decision and cites the situation in Libya has caused the oil supply disruption. John believes this is just a political tactic that is being used because OPEC has made it clear that it doesn’t care what happens to Western oil prices because they want high crude prices. 60 million barrels of oil is not even enough to meet the total oil consumption in one day (about 85 million) so its effects will be minimal and the IEA will eventually have to refill its reserves at higher prices.

 John believes that the United States isn’t serious about domestic resource production since it has prohibited most drilling in the Gulf of Mexico, is slow to trickle out drilling permits, and has lawsuits pending against the government for drilling permits already handed out. He says that it is not just this administrations fault but also Congress who has been reluctant to increase domestic oil production. Due to these problems John believes that the price of gas will be $5 a gallon by the 2012 Presidential elections and a barrel of oil will be north of $150 by next spring or summer. You can hear his whole interview at http://video.cnbc.com/gallery/?video=3000034520

Upon retirement from Shell as President in 2008, John Hofmeister founded and currently heads the nationwide membership association, Citizens for Affordable Energy. This Washington, D.C.-registered, public policy education firm promotes sound U.S. energy security solutions for the nation, including a range of affordable energy supplies, efficiency improvements, essential infrastructure, sustainable environmental policies and public education on energy issues. You read more about Citizens for Affordable Energy and his recently published book Why We Hate The Oil Companies at his website http://www.citizensforaffordableenergy.org/

I’ve been involved with the medical device industry for nearly 30 years, and I’m not sure I’ve ever seen a time when device company executives or investors were happy with the FDA.  Perhaps that shouldn’t be surprising; after all, the FDA’s regulatory mission and powers mean that the agency is always in a position to say “no” – to constrain companies’ ability to sell new products, make design and manufacturing changes to old ones, or to craft powerful marketing messages.  FDA’s business is to protect the public health by designing the hoops device companies must jump through and erecting hurdles they need to get over.

During these last three decades, industry and the FDA have been partners in a slow and repetitive dance.  Over and over, increasing industry dissatisfaction and criticism of the FDA is followed by heightened congressional scrutiny of the agency, incremental FDA adjustment, and a return to a cautious but more nearly comfortable relationship.  We are nearing the resolution of one such cycle right now.

Industry’s major complaints about the FDA relate to the process for obtaining marketing clearance for new products.  FDA, to industry’s eyes, is too slow in reviewing submissions and too arbitrary – or at least unpredictable – in its data requirements and its decisions.  “How can you run a business,” industry argues, “if you can’t predict time and cost to market for a new product under development?”  The same is true, of course, for potential investors; time and cost to market are critical variables in assessing investment risk and likely return.

The facts on review times are quite clear – FDA is taking longer to review device submissions, whether 510(k) premarket notifications or premarket approvals (PMAs), than it should.  The chief cause of lengthening reviews, however, is unclear.  FDA itself points to understaffing due to inadequate congressional appropriations (the workload is increasing much faster than the agency’s headcount) and to poor quality of submissions by industry.  Industry argues that the FDA isn’t technically competent enough to conduct high quality reviews of many technologies, and that the agency’s guidance to industry is sometimes inadequate, often obsolete, and too frequently ignored by the agency itself.   This all leads to submissions that must go through multiple review cycles before a definitive decision is made.  A neutral observer, one without a dog in any particular product review fight, might further point to both the Congress and the Presidency as contributors to the problem: the Presidency for an inability in recent years to secure and retain stable leadership for the agency; the Congress for whipsawing agency leadership between hearings to complain about public health problems due to inadequately rigorous reviews and hearings to complain about the slow pace of new product approvals.

The facts are less clear with regard to the predictability of FDA’s submission data requirements and its decisions.  The focus here is on 510(k) “substantially equivalent” determinations.  Industry and investors believe that the agency has been arbitrarily raising the bar for these reviews, increasingly requiring substantial clinical data to support notifications that shouldn’t need any such data.  The agency, on the other hand, believes that industry has increasingly submitted notifications in which the argument for substantial equivalence is so attenuated, with so many variables in play, as to demand clinical data to demonstrate the argument’s validity.

What FDA is doing with the 510(k) program right now directly addresses industry’s and investors’ complaints – it is in the final stages of providing much needed clarification of how it will determine “substantial equivalence” and when it will require clinical data to do so.  Every indication is that not very much will change, but that policies and standards that have been evolved in practical application over the last few years will be clearly articulated.  Industry will have a much clearer basis for knowing what FDA will require in premarket notifications; investors will have improved capability to predict time and cost to market and to evaluate risk.

One final point needs to be made.  Even an increase in FDA’s requirement for clinical data to support 510(k) submissions would not be an unequivocal negative for many products, and certainly not for investors; indeed, it would in some sectors be a positive.  The number of products that have passed 510(k) scrutiny without clinical data, only to fail to gain coverage from insurers because of the lack of clinical data from well-structured clinical trials to support efficacy, is startling.  The more innovative the technology – the more attenuated the substantial equivalence logic – the more often this happens.  The easy 510(k) route to market is not necessarily the easy route to commercial success.  Heightened FDA data requirements would, in such cases, be doing imprudent company managers a favor.

Dr. Edward Berger, has more than 25 years of experience working in senior management or as a consultant with medical device, biotechnology and health services companies, dealing with problems at the intersection of U.S.and international health care policy, corporate strategy development, and strategically sensitive corporate communications with government, investors and the media. He is the founder and principal of Larchmont Strategic Advisors which helps life sciences companies create and implement integrated strategies to address the many policy and regulatory obstacles and opportunities they face in their efforts to secure public and private insurer coverage and optimal reimbursement for new or evolving technologies.

The ESI acquisition of Medco Health Solutions raises interesting questions, not only about FTC approval, but what does this do to plan sponsor strategies in future contracting.  Realistically, there are only a few PBMs sized to manage and handle large self insured programs. The majority model is as an independent PBMs and then there is CVS/Caremark as an integrated pharmacy model. Limiting choice in vendor or model will raise questions as to the value of carve out contracting versus a health insurer integrated product.

 

Randy Vogenberg is principal at the Institute for Integrated Healthcare which offers health care and employer based benefits strategic consulting, value based benefit plans and design, pharmaceutical, diagnostic & device industry training, advising on managed customer linkages, and health policy and applied economic issues analyses for benefit design solution opportunities in the health care marketplace. He also principal of Bentelligence which provides a 360 degree view of benefits advisors, health plans and employer plan sponsors. It is a web based market intelligence tool and expert support for all stakeholders in health care. In addition, Randy recently wrote a book called Pharmacy Benefits that addresses benefit plan design, the selection of a pharmacy benefits manager and pharmacy network, compliance, specialty pharmacy, and cost-saving strategies which you can purchase at www.ifebp.org/pharmacy.

A New York-based portfolio manager recommends Hasbro (NASDAQ: HAS, $40.31) as a Buy.  The company has built an impressive brand portfolio.  A strong effort has been made to increase presence in the entertainment arena and build licensing opportunities.   There are multiple growth drivers in place to expand top-line in the next few years, including a recently launched TV channel in a 50-50 JV with Discovery, an increasing number of movies, mostly new installments of popular franchises featuring HAS brands, that will come out in 2011-2013, Sesame Street merchandise finally hitting the stores after the company won the license previously owned by Mattel in 2009, and a new line of toy building blocks to compete with LEGO.

The presenter is targeting a 30-40% upside in the next year.  The company has been buying back stock.  HAS carries a 3% yield.  A buyout approach last year by Providence Equity, a well-respected media entertainment player, at around the same price level indicates attractive value here.