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Lawrence Meyers is the CEO of PDL Capital, which brokers financing, strategic investments, and distressed asset purchases between private equity firms and businesses of all stripes. He was the first U.S. journalist to cover the payday loan sector for The Motley Fool. He is a frequent contributor... More
My blog:
Ichabod's Cranium
My book:
Teacher of the Year: The Mystery and Legacy of Edwin Barlow
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  • Don’t Blame Drug Manufacturers for H1N1 Vaccine Shortage

    There are two primary reasons behind the shortage of H1N1 vaccine in the U.S.  The first involves the fact that the science used to make the vaccine is really old-fashioned. The second is the fear-mongering caused by the Anti-Vaccine Activists (“AVA’s”). 


    Making Vaccines Bocky Style


    My daughter’s favorite stuffed toy is a (female) chicken named Bocky.  Imagine thousands of real Bockys sitting in their cages waiting to meet a Mr. Bocky to be able to lay an egg so that a strain of H1N1 can be injected into it. The virus reproduces inside the egg and, several months later, retrieved. Voilá!  That’s how vaccines are made.


    In a normal flu season, all those Bockys need to lay several million eggs. Ever worse, this year we have both the H1N1 and the regular flu strain to deal with.  So that means a whole lot of extra lovin’ is needed to meet egg demand. 


    Now, despite using the antiquated Bocky Method, drug manufacturers have still produced the actual vaccine in 3 months – much faster than the normal 7 month timetable.  They even managed to complete this process after being told the regular flu strain had to be the one completed first!   One vaccine provider has maxed out its manufacturing capacity, even devoting their entire UK site to the vaccine.  They are literally doing the best they can with what they are required to work with.


    Natural question:  Why is the U.S. still using the Bocky Method when the European Union is producing it using mammalian cell cultures –  a much faster and cheaper process, that also eliminates risks such as allergic reactions to eggs?  After all, polio vaccine is already produced under this method.


    Faster, Adjuvant, Faster!


    There’s yet another method to speed up production.   There is an additive that can be put into the vaccine called an adjuvant, which stimulates the immune system to respond more vigorously to the vaccine.  It makes the vaccine more efficient, because you need to inject about 25% as much of it.  In Europe, an H1N1 vaccine with adjuvant can be used on 4 times as many people as the same H1N1 vaccine used in the U.S. without the adjuvant. 


    The World Health Organization has no problem with adjuvants, either.  As reported in the Nov. 2 NY Times, W.H.O.’s director of vaccine research confirms that 14 other countries use the H1N1 vaccine with adjuvants and all appear to be safe.  One adjuvant, MF59, has been used for 12 years in European seasonal flu vaccines.


    The Commission on the Prevention of WMD Proliferation and Terrorism has noted that, while H1N1 isn’t a bioterrorism event, when one does occur, wouldn’t we all rather have those vaccines made as quickly as possible?


    Despite the fact that demand for H1N1 vaccine exceeds supply, the FDA only recently approved the use of adjuvants in vaccines…and yet federal health officials still won’t use them.


    Natural question:  why isn’t the U.S. using adjuvants to stretch the vaccine supply?




    Anytime something bad happens, it is human nature to seek out a scapegoat.  We need to put a face on evil.  We need a place to direct our anger, frustration, and anguish – particularly when these bad things happen to children.  Our inability to control when and where bad things will strike, and fear associated with our lack of control, runs so deep that they are mirrored in many fairytales:  The Pied Piper of Hamelin, The Norwegian Troll Myth, The Boogeyman – dozens of cultures create a monster that kidnaps or kills children.  It’s our way of trying to explain the unexplainable, the hurtful, the unthinkable – that something bad can happen to a child.


    A neurological disease (“ND”) is one such terrible thing. And ND’s boogeyman is vaccination.


    The result is an anti-vaccination movement that has spread over the years, and become so vocal that it has affected U.S. policy and impacted the country’s response to H1N1.  The Feds are understandably skittish – they’ve been sued once already over vaccine additives.   So the AVA propaganda has created needless fear and limited options.   They can be blamed for the fact that demand currently exceeds supply.


    Behind the Fear – Lack of Evidence


    Have you ever seen the Boogeyman?  I haven’t.  Nobody has.  Because he isn’t real.


    Fear is, by nature, irrational.  As the incidence of disease decreases from immunization, concern naturally shifts from adverse disease effects from lack of immunization to adverse effects from immunization.


    For example, there is not a shred of evidence that autism is, in any way, linked to immunization.


    This study found no evidence.

    Neither did this one.

    Nor this rather famous one.


    And for those concerned about other bad things happening from vaccines, here’s another

    40-odd studies that also showed no linkage between vaccines and various bad things.


    However, there is a difference between Bocky Littles – who insist that vaccines cause neurological disorders -- and those who feel enough anecdotal evidence exists to seek more data. There is no reason not to call for a well-funded, comprehensive study with well-defined methodology. After all, it is our children we’re talking about.


    As a parent, you must distinguish between proper scientific studies such as those listed above, and random anecdotal stories of something bad happening “about the time my kid got vaccinated”.   Any number of factors that had nothing to do with the vaccination may have contributed to this unfortunate event.


    We don’t know what causes autism, period.  It is very likely to be a complex variety of factors.  As a parent, do you want to risk your child contracting any number of awful diseases because of an unproven link between vaccination and autism, or any other neurological disorder?


    The Blame Game


    November 17th’s Homeland Security hearing was filled with finger-pointing regarding the shortage.  As expected, nobody took responsibility.  Sen. Claire McCaskill (D-MO) and HHS Secretary Kathleen Sibelius passed the buck, claiming drug manufacturers overpromised and under-delivered.  Well, thanks to the antiquated Bocky Method, the virus grew slower than expected.  This wouldn’t have happened if – say it with me – the vaccines were produced with faster processes.


    Sibelius also copped to going public with overly optimistic estimates.  By doing so, she created expectations.  That gaffe put unfair further pressure on the already-limited manufacturers.


    At the hearing, Sen. Susan Collins (R – Maine) specifically asked about adjuvants.   Dr. Nicole Lurie, the assistant secretary for Preparedness and Response at HHS had no good answer, but did say that public confidence in vaccines with adjuvant is low, “and we didn’t really want to rock the public confidence in a new vaccine with adjuvant”.


    So there you go.  Fear – promulgated by the AVA’s.  Mix it with unrealistic expectations promulgated by Sibelius, and you have an impatient populace unfairly blaming the drug manufacturers.

    Enough is enough.  It’s time to take the blame off drug manufacturers for any vaccine shortage.  The blame must fall first on the anti-vaccination movement.  Next, the Obama administration needs to import its message of CHANGE to both HHS, and the FDA.  We are in the midst of a pandemic, and it’s time to put science first.

    How is this actionable?

    I believe the swine flu pandemic has made it apparent that it's time for the U.S. to move vaccination science into the 21st century.  Novartis (NVS) has built a lab capable of using mammalian cell methods here on U.S. soil, so it's only a matter of time before it is approved for use.  I think we'll see a bigger push by health advocates, including doctors, to roll out this science.  It means a company like Novartis stands to gain because it can produce more vaccines each year.   This may help increase Novartis revenues in the years to come, and I don't think this has yet been reflected in the stock price.

    Full Disclosure: No position in any stocks mentioned



    Disclosure: Full Disclosure: No position in any stocks mentioned
    Dec 10 5:20 PM | Link | Comment!
  • Astra-Zeneca Flies to Jupiter on Drug Results

    The second phase of a monumental pharmaceutical study were released a few days ago, and women everywhere must pay attention.  For those who believed the myth that cardiovascular disease was not significant in women, and that the use of statins wouldn’t help women who might be at risk – this is a big wake-up call.


    Pay attention:  you are at risk and statins can be of enormous benefit.  (And improper legislation may prevent women from having access to such a beneficial product).


    What was the name of the study?


    Justification for the Use of statins in Prevention: an Intervention Trial Evaluating Rosuvastatin.  That’s JUPITER, for short.


    Why was the study done?

    1) Twice as many women die of cardiovascular events (CVE’s) than from all forms of cancer combined.

    2) You don’t have to have high cholesterol to be at increased risk for CVE’s.

    3) If you have glucose issues, you are at risk for diabetes and increased CVE risk.


    Astra-Zeneca wanted to know if their drug, CRESTOR, could help these people.

    This drug is a statin, which slows the rate that cholesterol is produced in the body.


    What did the study measure? 

    The effects of 20mg of the drug on the risk of CVE’s.


    Why was the study important?

    1) Women previously weren’t considered candidates for statins.  Now they are.

    2) It was huge.  17,802 participants.  9,000 got the drug, of which 3,426 were women.

    3) It was long-term, randomized, double-blind, placebo-controlled.


    Dr. Benjamin Ansell, MD FACC, Assoc Prof of Medicine, UCLA School of Medicine, sums it up.  “This is an important study as it not only included significant representation by women, but it identified a strategy whereby their leading cause of death – heart disease – could be minimized. 


    What were the results?


    76% of women, 60 and over, had arterial revascularization.  In other words, the clogged arteries of most of these women were cleared out.


    Even if a woman doesn’t actually have CV disease, but is at increased risk from other factors, the drug reduced the risk of CVE’s by 46%. 


    For the 4,100 patients whose LDL fell below 50mg/dL because of this drug, they experienced a whopping 63% reduction in CVE’s.


    What this means for women


    Statins aren’t just for women who have cardiovascular disease.  They aren’t just for women with high cholesterol.  They are for any woman who exhibits certain risk factors. 


    The bottom line, therefore, is that statins can make a huge difference in prevention. Dr. Ansell says, “Considering that women have a higher likelihood of their first heart attack being fatal than men, are less prone to get as aggressive care during a heart attack as men, and have fewer premonitory symptoms than men, prevention is particularly key among this group. The aggressive use of statins among this group of women whose risk was not previously recognized and who were not considered candidates for cholesterol medications saved lives here.  It puts in better perspective the balance between risk and benefit in this population.”


    How is this actionable?


    First of all, America is getting fatter.  Our dietary habits are out of control.  So these drugs will always have a place in our society and, I believe, a growing place.  Several companies have statins on the market, all of which have had excellent results both in trials and the real world.  Merck (NYSE:MRK) makes Zocor, Pfizer (NYSE:PFE) makes Lipitor, Bristol-Myers Squibb (NYSE:BMY) makes Pravachol, Novartis (NYSE:NVS) makes Lescol, and Astra-Zeneca (NYSE:AZN) makes Crestor.


    So, for starters, I think we can count on healthy revenue for all of these companies from these statins until their patents expire.  We have to wait and see if the Crestor results show up on any of the other drugs before we make that leap, however.


    In the meantime, however, we should expect to see a lot more women start to use statins and Crestor, in particular.  The results are so favorable for women who don’t even have CV disease, that its usage could spike.  It will provide strong support to Astra-Zeneca’s already terrific line of drugs and bolster its revenue.   I would suggest holders of Astra maintain their position, and that those seeking exposure to the pharmaceutical market consider Astra as a solid choice.  It’s undervalued compared to its peers and operates with higher margins.  Given the selloff from its high, I see this news as justifying opening a position.


    Full Disclosure:  Lawrence Meyers has no position in any of the stocks mentioned.

    Disclosure: No position in any stocks mentioned
    Dec 04 4:32 PM | Link | Comment!
  • Debunking Citron's Hit Job on World Acceptance Part 3

    Citron Research, run by the notorious Andrew Left, has already seen its short-selling attacks on World Acceptance Corporation (WRLDdiscredited by this column.  Further insisting on embarrassing himself, Left launches into part three of his character assassination by  demonstrating his ignorance of World's business model, as well as the legislative environment.

    Today I'll debunk all his assertions, but also let readers in on the dirty little secrets Left hasn't disclosed about himself which should give any reader pause.

    The REAL Regulatory Risks

    Left's rubbish begins as it always does -- with fear-mongering.  He cites the overwhelming support of the recent credit card bill, and potential new regulations in the for-profit education industry, as being threatening to World's business model.  What he doesn't mention is that neither are in any way related to what World does.  The goal is to scream that the legislative environment is unfavorable, and World could be next! 

    He follows this up by frothing at the mouth -- that World will "unavoidably (in big red letters!) become a target of new regulation that will limit operations of their core installment loan business".

    "Unavoidably (in big red letters)"?  Really?  So Citron's opinion is that legislation will happen, period.  No doubt about it.  As sure as the sun rises each day.  Furthermore, Left claims, there are three federal bills that "have widespread support" and that just last week, four bills died in the Texas Legislature's committees.   He states, "for anyone to state there is no legislative risk, they obviously do not have CNN or read a newspaper".  Well, here's all the reasons why Left should stick to sucking lemons and following legislative details more closely, instead of predicting how Congress will behave based on a parochial view of politics.

    1) Sen. Tim Johnson (D-SD) is the chair of the Finance Subcommittee. He supports payday and installment loans and understands their value.

    2) Durbin is not on the finance committee, and cannot force his bill to be heard.

    3) Durbin withdrew the bill as an amendment to the credit card bill, because the votes weren't there to get it passed.  If it didn't pass then, why would it pass on its own?

    4) The Senate overwhelmingly voted down an amendment capping credit card rates at 15%. This implies broader concerns Congress has about price controls.

    5) The House Subcommittee hearing on Rep. Gutierrez's payday loan bill (April 2) showed that many committee members also understand payday loans and aren't willing to institute a de-facto ban by capping rates at 36%.   If they won't ban payday loans, they won't ban the less-expensive installment loans.

    6) Obama is not stupid. He cannot restrict credit in this environment.

    7) Once it becomes apparent that the new credit card bill is going to restrict credit (some say as high as $3 trillion, although I think that's too high), this will further work against these bills.

    Left admits that none of these bills have passed, but "these risks do exist", and that World's new 10-K must show a change in the disclosure about regulatory risk.   Except they already altered their disclosure in the last quarterly report, reflecting the possibility of legislative changes.   Did Left even read it?

    Sure, these risks exist.  And they've already been priced into the stock.  Furthermore, there are risks that many other things could happen.

    A meteor could crash into the Earth.

    A raging forest fire could kill all living things in Iceland.

    Godzilla could rise from the Bermuda Triangle and eat Cuba.

    Left could be indicted by the SEC.

    As for the situation in Texas, the legislature there meets every other year for only a few months at a time.  And this session is about to conclude.  Furthermore, the bills Left refers to are being pushed by a state senator who has no leverage in the committee he's in, while being up against a very pro-business legislature and governor.  Again, its the details Left doesn't bother to concern himself with.

    Lies or Stupidity?

    Left is either incapable of reading a balance sheet or is outright lying with respect to his claims regarding tangible book value.   He claims that the market is valuing World at less than tangible book value because World's main asset -- $460 million in loans -- isn't worth anything.

    But I've already shot down that argument in my previous articles.   The reason is that the historical loan loss provision for these receivables is about 16% -- meaning $390 million of it is collectible. 

    Left closes his article by saying, "Citron strives to present stories detailing business risks, which are, to date, being ignored or denied by the subject company and its analysts, always backing up its opinion with factual links."

    First, the links may be factual.  But Left hasn't interpreted them factually.

    "It believes caricaturizing critical opinion as 'fear mongering' is foolish, and savvy investors ignore risks at their own peril."

    Yes, they do.  Savvy investors also know a hatchet job when they see it.

    A Question of Character

    Now, as to Left's own personal history, which should give readers some idea about his character.  Back in 2000, the National Futures Association (a regulatory agency watching over the commodities and derivatives markets) found that Left had made "false and misleading statements to cheat, defraud, or deceive a customer".  He was barred from "association with and from acting as a principal of any NFA member for three yeras, ordered him to take an ethics training course, and placed restrictions on his activities..." (Source: NFA Case ID# 0253075)


    Then there was the little matter of Left being sued for Fraud and Deceit, Negligent Misrepresentation, and Breach of Fiduciary Duty -- a case which he lost and was ordered to pay restitution for.

    Double oops.

    So, we have a known short-seller with a previous history of ethics violations and check fraud, who has written three articles loaded with false statements that have been completely discredited....and is no longer permitted to post even here at SeekingAlpha.

    As my old math teacher once said, "Take a moment to think before following the White Rabbit down that hole".

    So just as Left claims to put out his information and let the reader decide, I'll do the same. 

    Full Disclosure:  Long WRLD - shortly after Citron's first report

    May 28 1:20 PM | Link | 4 Comments
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