Glaxo Knows America Is the World's Drug Capital
By James J. Cramer
05/03/2002 11:44
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What do you do if you really think that Bristol-Myers Squibb BMY can get a bid, but your discipline says the company stinks, and you won't buy takeover stocks with declining fundamentals?
What I do, is think, OK, what's the maximum amount I can lose in a call buy above the market that would let me speculate without making me feel like a total moron?
In this case, I think that a 35 call buy, out a couple of months, is increasingly making sense, if only because it's better to be a drug company headquartered in the U.S. than in Britain, and GlaxoSmithKline GSK might be itching to make that change.
Richard Sykes, the man who ran Glaxo until his recent retirement, made it very clear that unless the U.K. changes its rules about patent, health care payments and income-tax laws, the company would have no choice but to change where it is located.
That's a big move if you are going to just pick up and go to another country. Lots and lots of people work at Glaxo. But if you were to merge the two and move it lock, stock and barrel to Bristol's now totally wide-open New Jersey facility, you sure do kill two birds with one stone.
It wouldn't have worked at higher prices. But at these prices, Glaxo may just well make good on its threat.
No matter how screwed up the pharmaceutical sector is, this deal would be a huge win for Bristol. And now matter how tough the current climate is against the drug stocks in the U.S., it is still the best in the world.
So I put it out there with all of the usual caveats. I can't buy calls, so I won't be doing this myself.
Random musings: I'm doing some work on Tenet Health THC . I'm betting this stock hasn't run too far. I'm also checking out Norfolk Southern NSC : intriguing on pullbacks. |
