Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM Wednesday, October 26, 2005:
Key with life sciences companies:
1. They move when they're hot, e.g. Novavax, which I mentioned yesterday.
NVAX is rising because it has allegedly a quicker, cheaper way of making avian
flu vaccines. I'll know more today after 11 AM when I hear them speak at the
The C. E. Unterberg, Towbin, Life Sciences Conference, which continues
today at New York's Palace Hotel. For a full schedule, Click
here. I'm betting Novavax's presentation will be available via Webcast.
Check the company's web site. If not, I'll try to get a copy and post it tomorrow.
2. The can be very volatile. Before the recent runup, Novavax had not
been a stellar performer, and probably won't be after today's conference. We'll
see at 11 AM this morning.
3. You can predict their potential. Statistics on how many of us are
sick and will get sick are freely available. Multiply what you'll get for the
drug by the number of us sick and, bingo, the company's sales. Figure a handsome
market, and bingo, profits.
4. Drug companies pass through FDA milestones. Market cap rises accordingly.
Phase I, Phase II, Phase III. Approval, etc. The BIG key is to find a life sciences
company with a low market cap, great drugs and a management that tirelessly
tells its story to Wall Street.
5. It may be getting much cheaper to bring new drugs to market. This
was the most exciting thing I heard at yesterday's conference. There's something
called targeted therapeutics, which can figure if someone sick with cancer will
respond positively to a drug. Yesterday VioQuest Pharmaceuticals (VQPH),
which also makes cancer drugs, talked about Genentech's drug Herceptin. Had
Genentech used targeted therapeutics, it would have needed fewer patients in
its trial (470 versus 2,200), had a much higher response rate (50% versus 10%),
been able to get to market faster (1.6 years versus 10 years), had saved itself
$35 million and accelerated its income stream by $2.5 billion. Herceptin, a
Genentech product, is used for breast cancer.
VioQuest intends to use targeted therapeutics to bring its drugs to market.
It has something called sodium stibogluconate (SSG) for oncology -- the branch
of medicine that deals with tumors -- their development, their diagnosis, their
treatment, and their prevention. In short, cancer. What I also like about VioQuest
is that it has a revenue-generating profitable business making technology called
chiral which helps drug companies make their drugs much cheaper. Revenues of
VioQuest chiral sub. have been exploding. For more on VioQuest (which I happily
own a piece of) here's yesterday's PowerPoint presentation. Click
6. There's something endearing about biotech management. Many presidents,
chairman, etc. tell you about their mother who died of breast cancer or their
father who died of prostrate cancer. They tell you that before they die,
they'll find a cure. And that cure will be their legacy to the world. What greater
legacy could anyone wish for?
The Lap of Luxury: Years ago I got an economics
degree. It is useless, except for writing gibberish about where the economy
is or isn't going. Studying economics is the study of what motivates buyers
and sellers. That is too conceptual. The best explanation of what economics
is comes from yesterday's The New York Times. The article was written
by Elisabeth Eaves who is the author of a book called "Bare: The Naked
Truth About Stripping." Enjoy:
again. Another innocent man who just wanted a few lap dances claims to have
been victimized by an exclusive New York strip club, Scores.
This time it's
an executive from Missouri named Robert McCormick, who, treating himself and
friends, ran up a $241,000 bill at Scores on his corporate American Express
card two years ago. American Express is now suing him for refusing to pay
up. Several other unhappy customers have also sued Scores over large bills.
These don't seem to be cases of bill padding. American Express sought signed
receipts from the club before bringing its suit against Mr. McCormick. In
the most recent suit against Scores, meanwhile, the plaintiff's justification
is simply that he was drunk when he signed his bills.
the Manhattan district attorney's office is investigating allegations of overcharging
at Scores. To which I say, as someone who has worked in strip clubs, you've
got to be kidding - there's no such thing as "overcharging" in this
Dior "overcharge" when it sells a handbag for $13,000? That depends
on how you look at it. If you see the handbag as a few pieces of stitched
leather, the price is grossly inflated. If you see it as a source of heady
self-worth - a passport to an exclusive club - then it's hard to say what
price would be too high.
This is the
economic logic relied on by purveyors of luxury goods. It's not about the
utility of the product. It's about making the customer feel as if he has arrived.
particularly high-end ones like Scores, provide a luxury service. That $3,000
price tag on a bottle of Champagne isn't just for the beverage; it's part
of the price of the experience. Mr. McCormick probably didn't go to Scores
strictly to see topless women, or even for the physical contact and potential
sexual gratification of a lap dance. Both experiences can be had in simpler,
Rather, he and
his colleagues probably went because being surrounded by fawning, semi-naked,
Champagne-flute-wielding women was for them a symbol of success. It's like
hiring a chauffeured limousine: a taxi would get you there, but without the
When I worked
in a Seattle peep show, I had a customer who told me his name was Excalibur
and quietly slipped me his poetry. Part of my job, in that moment, was to
make him feel like a Knight of the Round Table. This required only a show
of curiosity and respect. He must have found those things hard to come by
in the real world, though, because he paid me well to help spin the illusion.
With many customers,
fawning is key. What a stripper sells is not her ability to dance or take
off her clothes, but her ability to suspend the customer's disbelief.
If she is doing
her job right, his bald spot and his mortgage cease to exist, and he enters
an adolescent fantasy of sexual prowess, temporarily transformed into James
Bond, Han Solo and Hugh Hefner all rolled into one. The dancers keep cooing
and flattering until the money runs out. It's not duplicitous; it's what the
patron signs up for.
I have little
sympathy for these carping customers. Their complaints are the height of boorishness.
It's acceptable to indulge your James Bond fantasies, but it's not acceptable,
when the bill comes due, to remain convinced that you're James Bond. The dancers
weren't in it for kicks.
I worked with, the most dreaded customers were not the obese or the lame.
Rather, we feared customers who thought they were exceptions to the rule.
They were just handsome enough, or successful enough, to foolishly think that
their own sex appeal was tip enough.
It's just this
kind of guy who would backpedal on a strip club bill and go crying to the
courts that he was hustled. Well, sure, the dancers hustled Mr. McCormick,
but no more so than the occasional Mercedes dealer. Buyer's remorse is not
an occasion to stiff the seller.
pay the bill. A reasonably priced lap dance is not a right.
is the cover of the Eaves book. You can buy it for $10.17 from Amazon or
$13.45 from Barnes and Noble. I can't imagine why you would want to, however.
This is Robert McMormick, 40, and father of three girls. He and three friends
ran up the Scores tab in October 2003. McCormick is the chairman and
chief executive of Savvis Communications (SVVS), a publicly held telecom and
IT services provider. Earlier this week, Savvis said its Audit Committee is
conducting a full investigation into matters relating to a lawsuit brought by
American Express Travel Related Services against Savvis and its CEO, Robert
A. McCormick, for nonpayment of charges on a corporate credit card issued to
Mr. McCormick. Pending completion of the investigation, Mr. McCormick has been
placed on an unpaid leave of absence effective October 24, 2005. To assist in
its investigation and to expedite a comprehensive review, the Audit Committee
has engaged Sullivan & Cromwell LLP (a very pricey New York law firm) as
independent counsel. Upon completion of its investigation, the Audit Committee
will recommend appropriate action to the Board of Directors.
American Express says McCormick charged the $241,000 worth of wine, women and
lap dances on his corporate credit card. The big spender from the "Show
Me State" insisted his bill was inflated. He claimed he spent a mere
$20,000 and refused to pay a penny more. But the club has experience
with big-spending out-of-towners who get carried away in the big city
and insisted it had proof he knew exactly how freely his money was flowing.
According to the New York Post, it had him sign repeated waivers
identified by his fingerprints that he was not intoxicated and that he
was responsible for the charges. Amex conducted its own investigation, sided
with Scores and reimbursed the strip club and then sued McCormick and Savvis.
hasn't been doing well lately.
In fact, Savvis' has lost money in each of the last five quarters -- in amounts
ranging between $60 million and $21 million. It looks like it has enough cash
to last another few months -- with luck maybe three. It will be a race as to
who collects first, Amex or Savvis' creditors.
The New York Daily News reported that McCormick, a father of three girls,
"was an insatiable customer who hired a virtual harem of lap dancers. In
the mirrored room, popular with high rollers and celebrities, the stripper enthusiast
demanded 10 dancers lavish him with attention at the eye-popping cost of $4,000
an hour. When their time was up, McCormick insisted club managers bring more
girls -- and keep them coming. "I need 10 more," he would say after
the hour's entertainment was over, waving his arms like he was motioning a jumbo
jet in for a landing," according to a source at the strip club. The New
York Daily News headlined its story, "Going bust for lust."
they do it in China
A Chinese couple gets married. She's a virgin. Truth be told, he
is not too experienced either. On their wedding night, she cowers naked under
the sheets as her husband undresses.
He climbs in next to her and tries to be reassuring. "My darring"
he says, "I know dis yo firss time and you berry frighten. I pomise you,
I give you anyting you want, I do anyting - juss anyting you want. Whatchou
want?" he says, trying to sound experienced, which he hopes will impress
his virgin bride.
A thoughtful silence
follows and he waits patiently (and eagerly) for her request. She eventually
replies shyly and unsure, "I want to try somethin I have heard about .
silence, this time from him. Eventually, in a puzzled tone he queries...
Chicken wiff broccori?"
+ Dumb reasons we hold losing stocks. Click
+ How my private equity fund is doing. Click
+ Blackstone private equity funds. Click
+ Manhattan Pharmaceuticals: Click
+ NovaDel Biosciences appeals. Click
+ Hana Biosciences appeals. Click
+ All turned on by biotech. Click
+ Steve Jobs Commencement Address. The text is available:
Click here. The full audio is available. Click
+ The March of the Penguins, an exquisite movie. Click
+ When to sell stocks. Click
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
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