EOG Resources, Inc. (NYSE: EOG) shares moved sharply higher today after the company announced it increased organic production growth estimates for 2009 and 2010 to 13 to 15 percent from the previously stated annual average of 10 percent. The oil company also disclosed information about four promising new crude oil and natural gas plays that could contribute to future reserve and production growth. And finally, it increased the potential reserve recovery from its Fort Worth Barnett Shale and Uinta Basin natural gas players. Combined, this is great news for shareholders as increased production schedules combined with record crude oil prices make for a profitable combination!

“By applying our expertise in horizontal drilling and completion techniques, EOG is positioned to replicate its success in the Fort Worth Basin Barnett Shale and North Dakota Bakken with several newly identified onshore North American plays that show substantial promise,” said Mark G. Papa, Chairman and Chief Executive Officer. “Although some of these discoveries are in the very early stages of delineation, they are expected to impact EOG’s reserves and production in the coming years.”

There are two key things worth noting in these recent statements. First, EOG Resources has developed better horizontal drilling and recover techniques that should allow it to achive higher per well reserve recoveries not only in Fort Worth but in future projects as well. Secondly, there are several remaining potential production increases that have not been considered for EOG’s production growth targets for 2009 and 2010. One in particular is a fourth horizontal well being drilled in northeastern British Columbia’s Horn River Basin where the company owns 140,000 net acres.

In the end, these production increases and potential production increases combined with increasing energy prices should not only enable EOG Resources to meet its future growth targets but surpass them by a substantial margin. Shares have rise over 20 percent today, adding billions to the company’s market cap, but there may be some room yet for even more upside when things settle down. Combined, these factors make EOG a stock worth watching closely!

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Unfortunately for Eli Lilly and Co. (NYSE: LLY), the FDA has rejected its application to sell a once-a-month injectable version of its schizophrenia drug Zyprexa.
 
The pharmaceutical company announced that the FDA issued a "not approval letter" for the drug, due to concerns about excessive sedation. This means that Lilly needs to perform additional studies before the drug can be reconsidered. This decision overrules a nonbinding recommendation issued earlier this month by FDA advisory panel that the drug should be approved despite concerns surrounding excessive sedation.

Given that the FDA usually follows the recommendation of its advisors, this news was surprising to the company and investors. Eli Lilly understandably said it was disappointed by the FDA's decision.

The drug is an alternative to Zyprexa, which is designed to ease hallucinations and other symptoms of schizophrenia. Zyprexa is already on the market in tablet form, but this new drug would allow administration only once a month.

A "not approval letter" usually means a drug is dead, but even if Eli Lilly can convince the FDA this hurdle will cause a significant delay to market.

This is all bad news for the Indianapolis-based company because though it has almost $19 billion in annual sales, this drug was predicted to add $500 million annually within two years. Long-term, a pharmaceutical company is only as good as its drug pipeline, and with Eli Lilly shares down only about 2% on the news the share price may not yet reflect the full consequences of this decision.

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MiddleBrook Pharmaceuticals, Inc. (NDAQ: MBRK) shares continue to surge today after the company said earlier this month that it hired Morgan Stanley to explore strategic alternatives, including a possible sale of the company. A recent FDA approval in January helped triple the company’s market value while an analyst commented that the company could look at a premium of 30 percent in case of a potential sale. Many other investors believe that the company could see an even higher premium given its novel Pulsys technology that would also be acquired. So, is MBRK a stock worth adding to your portfolio?

MiddleBrook received approval for its New Drug Application (NDA) from the U.S. Food and Drug Administration (FDA) for its one-daily Moxatag Tablets 775mg for the treatment of adults and pediatric patients 12 years and older with pharyngitis and/or tonsillitis secondary to Streptococcus pyogenes. According to the company, the approval was based on the company’s Phase 3 clinical study of more than 600 adults and pediatric patients 12 years and older in a double-blind, double-dummy, randomized, parallel-group, 50-center non-inferiority trial. News of this approval jumped shares from around $1.50 to over $3 the next day.

“We are extremely gratified to have received FDA approval of our MOXATAG NDA,” stated Edward Rudnic, Ph.D., president and CEO of MiddleBrook. “As the first and only once-daily amoxicillin therapy approved for marketing in the United States, we believe MOXATAG represents a major advance for patients and doctors seeking safe, effective, and convenient treatment options for strep throat. We now look forward to continuing our ongoing strategic evaluation process from a position of greater strength with this approval in hand.”

The approval brings to market the first major product that illustrates MiddleBrook’s PULSYS technology. This technology is essentially a change in the dosing paradigm that allows for more effective treatments that only have to be taken once daily. PULSYS exposes bacteria to rapid antibiotic pulses within the first hours of initial dosing, which appears to cripple bacteria’s natural defense mechanisms and eliminate them more efficiently and efectively than traditional infectious disease therapy regiments. MiddleBrook is one of the only high-tech companies focused on the antibiotics sector and seeks to redefine infectious disease therapy with this process. And it seems to be working in this latest drug release.

“Compared to four times daily penicillin, once-daily MOXATAG has shown comparable efficacy and tolerability in eradicating Group A streptococcal infections of the pharynx. However, the once-daily dosing of MOXATAG is a major advantage,” said lead study investigator Stan L. Block, M.D., professor of clinical pediatrics at the Universities of Louisville and Kentucky Medical Schools. “For the first time, physicians in the U.S. have the option of an FDA-approved once-daily amoxicillin therapy to treat their adolescent and adult patients with pharyngitis/tonsillitis. This should ensure better first- line therapy compliance with a penicillin class of antibiotic.”

In the end, all startup biopharmaceutical companies are risky ventures as they have no revenues and high R&D overhead. That said, MiddleBrook recently received an NDA and go-ahead from the FDA and was even able to raise an additional $21 million through a stock offering. This means that they should have a product to market within the next year while other investors are showing enough confidence to capitalize the company and keep it alive until it becomes profitable. However, given the steep rise in recent days, we could see a pullback before any more substantial gains. Combined, these factors make MBRK a stock worth watching in 2008!

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Elan Corporation (NYSE: ELN) is a pharmaceutical turnaround story that may soon get even better. The pharmaceutical company had a brush with bankruptcy in 2002 and reported a wider-than-expected loss of $405 million for 2007. However, the company said it expects a sharp turnaround in 2008, forecasing revenue growth of over 30 percent and possibly exceed $1 billion, driven by sales of its flagship multiple sclerosis drug Tysabri. The company currently receives 50 percent of the revenues from the drug when sales exceed $700 million. Altogether this turnaround story already has shares trading near their 52-week high, but many investors believe that they could get much higher next year.

Elan is also considering spinning off its development and manufacturing division Elan Drug Technology (EDT), which could be worth up to $1.5 billion. The company said that EDT has been consistently profitable and an important source of financing for the firm, with EBITDA of $125.5 million on revenues of $295.5 million in 2007. Meanwhile, the remaining biopharmaceuticals division posted a loss of $155.9 million on revenue of $463.9 million. Management reportedly wants to saddle the technology unit with $1 billion of debt to unlock value in its remaining biopharmaceuticals business as it pushes into profitability with the help of Tysabri. This is a classic move that could pay big dividends.

So, how will these events impact shares? Well, Tsybri is a blockbuster drug but does face a small hurdle with its newly-disclosed risk of liver injury. This is common for many drugs and the company kept its sales forecast, but it is a concern that it worth noting. Meanwhile, spin offs are well known for unlocking value in situations like this one. Now that the biopharmaceutical division won’t need additional financing through EDT, the move makes perfect sense to unlock value through debt reduction. Additionally, spin offs in general tend to outperform the overall market during their first two years for a variety of reasons.

In the end, this is all great news for shareholders. Elan has a blockbuster drug on its hands with revenues that could exceed $1 billion next year while it is also taking action to unlock value through a spin off. It not not too common to find a company with such savvy to act so quickly to unlock shareholder value. Shares may be trading near their 52-week high now, but they could definitely extend much higher over the next year. This makes ELN a stock that is definitely worth keeping an eye on in 2008!

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The Brink’s Company (NYSE: BCO) shares rose 1.4 percent today after the security company announced that it would spin off its home security unit in order to appease a growing number of dissident shareholders. The news comes after enormous pressure from activist shareholders Pirate Capital and MMI Investments, both of whom planned proxy contests to overtake the board if changes were not implemented. The company has finally agreed with the activists after completing a review of its strategic options with the help of the Monitor Group and Morgan Stanley. The Brink’s Home Security unit is one of the largest and most successful residential alarm companies in North America and the spin-off should unlock substantial value for shareholders who have been struggling to realize value in their investment.

“Today’s announcement, which is the culmination of a comprehensive and thorough review of the strategic options available to the company, further demonstrates the board’s commitment to enhancing shareholder value,” said Michael T. Dan, chairman, president and chief executive officer of The Brink’s Company. “Both BHS and Brink’s, Inc. are market leaders that outperform their respective peers on almost every operating metric. As separate publicly traded entities, each company should benefit from enhanced management focus, more efficient capitalization and increased financial transparency. In addition, shareholders will have a more targeted investment opportunity, and incentives for management and employees will be more closely aligned with company performance and shareholder interests. Given these advantages, we are confident that this transaction will enable BHS and Brink’s, Inc. to more quickly realize the valuations they deserve. I commend the employees of both BHS and Brink’s, Inc. for their hard work and dedication in building these two great businesses. I am confident that both companies will continue to create value for their shareholders, employees and customers.”

The spin-off will convert Brink’s into two separate publicly traded companies:

1. The Brink’s Company includes the businesses of Brink’s Inc., the world’s premier provider of secure transportation and cash management services. The company has approximately 54,000 employees at operations in more than 50 countries, had 2007 revenues of approximately $2.7 billion and operating profit of $223.3 million.
2. BHS, which has approximately 3,600 employees, is one of the largest and most successful residential alarm companies in North America. In 2007, BHS had revenues of approximately $484 million and operating profits totaling $114.2 million. BHS operates in all 50 states, the D.C. and several markets in two western providences in Canada. BHS’s ability to provide an outstanding customer service experience as awarded by J.D. Power and Associates, has created a loyal customer base that includes approximately 1.2 million systems under monitoring contracts. Through its dedication to high quality customer service, BHS maintains one of the highest subscriber retention rates among major residential alarm companies.

Brink’s also reached an agreement with activist hedge fund MMI Investments whereby one of their nominees will be supported as a director at the 2008 annual meeting while another director of theirs will be nominated at BHS following the spin-off. In return, MMI has agreed to withdraw its request to nominate any directors at the next annual meeting. Combined, these events represent yet another victory under the belt of activists and should result in substantial value creation for shareholders that many estimate as high as 40% to 50% premium. These factors make BCO a stock that is definitely worth following over the next few months!

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Oracle Corp. (NASDAQ: ORCL) said today that the U.S. Department of Justice and Federal Trade Commission approved early termination of the Hart-Scott-Rodino review period for its acquisition of BEA Systems Inc (NASDAQ: BEAS). Early termination means the Justice Department completed the review in advance of the 30-day maximum period allowed under antitrust law.

BEA has a special meeting of its stockholders planned for April 4 in order to vote on the merger. Though getting U.S. regulatory approval clears a major hurdle, the transaction still requires BEA stockholder approval and European Union regulatory permission.

Oracle said it agreed to buy BEA for $19.375 per share in January after earlier offers from Oracle were spurned for being too low, such as last year's $17 per share offer that valued the company at $6.7 billion. The current offer is worth approximately $8.5 billion.

The real question is, will the deal actually add value for Oracle now that it will probably be completed? Oracle said it expects only expects BEA to add one to two cents per share to adjusted earnings in the first year after the deal closes. Oracle has been on a spending spree in the last few years with CEO Larry Ellison spending more than $25 billion buying competitors like PeopleSoft, Siebel Systems and Hyperion Solutions.

Despite these purchases, Oracle has seen mediocre performance, especially in the last twelve-months. Combine this with Ellison's continued divestment from the company - 1 million shares just last month - and Oracle is definitely a hold, not a buy, right now.

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Yahoo! Inc.’s (NDAQ: YHOO) recent attempts to convince shareholders that Microsoft Corporation’s (NDAQ: MSFT) bid significantly undervalues the company have yielded very little. However, some people (1, 2) are now beginning to question why they haven’t mentioned a big piece of the puzzle - Yahoo’s stake in Asia. Yahoo’s stake in Yahoo Japan and China’s Alibaba alone are valued at around $11 billion by most analysts. Meanwhile, many others peg the true value much higher given the enormous growth potential in these markets. The search company’s dominance in these markets is well ahead of Microsoft and Google Inc. (NDAQ: GOOG) and could be a good argument for a buyout price higher than $50 billion.

Yahoo’s stake in Alibaba, which stands at around 39 percent, paid huge dividends after being acquired for $1.7 billion in August of 2005. Since then, the company has IPO’d and dramatically grew in market value while also continuing to grow its revenues at a break-neck pace. Interestingly, Alibaba is also concerned about the Microsoft acquisition, saying that it has a “reputation of using monopolistic tactics”. Foreign control of large companies is also a politically sensitive issue for Beijing, which has forced many prospective buyers to cut their stakes or sipmly delay the application process indefinitely.

Yahoo’s stake in Alibaba combined with its 34% of Yahoo Japan represent strategic high-growth investments that are just now starting to pay dividends. The U.S. markets are beginning to slow in online advertising and these Asian markets may by the key to driving future growth. The search company’s substantial investment in this area may only be worth $11 billion now, but it could very well be worth much more in the future as growth picks up. Many are now calling for Yahoo to work these numbers along with their existing calculations in order to come up with a clearly derived $40 per share valuation that they can take to Microsoft and use to negotiate a higher price.

In the end, Yahoo will probably end up being acquired by Microsoft. Management has had many opportunities to turn around the company and it would take a substantial amount of time to reach the $50 billion valuation that Microsoft has offered to pay. So, it is now up to the board to convince shareholders that they deserve a higher price. Whether or not they can do this remains to be seen, but many are now saying that they should attempt to place a higher value on their Asian stakes. Combined, these factors make YHOO a stock worth watching over the next few months!

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Radyne Corporation (NDAQ: RADN) shares spiked yesterday after Monarch Activist Partners voiced their support for Discover Group in its attempt to gain control of two board seats, despite an announcement that the company was already exploring strategic alternatives. The activist hedge funds believe that the company’s management may have an inflated sense of value and may resist reasonable offers made by potential suitors. As a result, they want to appoint their own directors to oversee the process and ensure that the company respects the rights of shareholders. So, is this entire situation one worth watching?

Radyne announced earlier this month that they had retained Needham & Co. as their financial advisor to assist it in exploring strategic alternatives, including a possible sale of the company. The firm had previously assisted the company in evaluating inquires received from time to time from prospective suitors. The company has not yet set any time frame for the conclusion of this process, but many shareholders are hoping that it can be completed within the next 3 to 6 months given that the company is already “in talks with various parties”. Many believe that the offer must come in at a 40 to 50 percent premium in order for current management to even consider selling the company.

Here’s the most recent letter sent by Monarch:

Monarch Activist Partners (Monarch) strongly agrees with your recent announcement to explore strategic options. We hope this news marks the beginning of actions that are more conducive to the best interests of Radyne’s shareholders.

The purpose of this letter is to address the February 13, 2008 13D filing by the Discovery Group LLC, a beneficial owner of close to ten percent of the company. We urge the board to amicably resolve Discovery’s request and appoint the two nominees to the Board immediately. Despite the announcement to explore strategic options we believe management potentially has an inflated sense of value that can be delivered under their tutelage and may resist reasonable offers given the company’s current position and marketplace conditions. Most importantly, a costly and protracted proxy contest does nothing to benefit shareholders and only furthers the rift between management and the company’s most significant owners. If the strategic alternatives process is open and fair, the Board and shareholders can only gain by appointing Discovery’s nominees.

We hope you give this request your full consideration.

In the end, this is all great news for RADN shareholders who have been suffering with subpar returns for some time now. Since the company is already in talks, we can assume that there are many buyers that are interested in the firm. The real question is how high management expectations are set. If Discovery is able to install its own board members, then there is a high likelihood that we will see a sale. Otherwise, it will be interesting to see what kinds of offers come in and how management responds to them. Regardless, this is definitely a company that is worth watching during the next few months!

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Netflix, Inc. (NDAQ: NFLX) shares spiked more than ten percent today after the company raised its first quarter and full year outlook on the heels of interest income and the completion of its $100 million stock buyback program. The online movie rental company also boosted its subscriber targets despite increased competition from companies like Amazon.com, Inc. (NDAQ: AMZN), Apple Inc. (NDAQ: AAPL) and its main competitor Blockbuster Inc. (NYSE: BBI). So, is this a trend that the company can maintain or a simple one-time blip amid a declining industry?

Netflix continues to benefit from a very favorable competitive landscape as well as improved cost-efficiencies across subscriber acquisition and overall marketing expenditures. This landscape will likely intensify in the comping year with digital downloads, but these offerings shouldn’t impact the DVD rental market for at least another few years. Netflix also announced a new popular program that allows subscribers unlimited streaming of about 6,000 movies and television episodes from their computer at no additional charge - a service that is quickly gaining popularity.

Netflix announced that the two main factors behind the raise in its net income was favorable interest income as well as its share buyback program. The movie rental company completed its share $100 million share buyback program announced earlier this year in record time. It repurchased 3.8 million shares of common stock at an average price of $25.96 per share, net of expenses. Meanwhile, the firm received higher interest income from its investments not related to the activities the company. It is unclear exactly how hight this impact was, but it will be interesting to see in their next quarterly report.

In the end, Netflix is proving that it has some staying power versus its steep competition. The guidance today not only showed increased operating efficiency in the fourth quarter (profits out-pacing revenues), but also a number of new subscribers that will help its bottom line. This company was a pioneer of online movie rentals and continues to impress investors as it works on new ways to compete against brand new competition from some of the world’s largest tech giants. Combined, these factors make NFLX a stock worth watching!

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Sybase, Inc. (NYSE: SY) shares rose marginally after the software-maker agreed to to boost its share buyback program as part of an agreement with one of its largest shareholders. The firm announced a $300 million self-tender offer at prices between $28 and $30 per share and will use its best efforts to complete approximately $82.9 million in additional open market repurchases prior to the completion of their 2009 annual meeting. The shareholder, Sandell Asset Management, will in turn drop its bid to takeover the board and limit its future acquisition of stock. So, should you ad some Sybase to your stock portfolio?

Sandell Asset Management had been concerned about the company’s large cash position. Sybase noted that it had about $735 million in worldwide cash, with between $225 million and $250 million of free cash. However, restricted cash and long-term investments reduce this amount to around $700 million in available cash balance. Looking ahead, the company estimated that it would need working capital in the United States of about $85 million and $115 million outside of the United States. Clearly, this is excess cash that could be leveraged elsewhere to deliver value for shareholders rather than sit in a bank account.

So, is this buyback a good deal for shareholders? The current agreement calls for purchasing at a significant premium to the current market price. The premium currently stands at around 9.5 percent and could rise higher, since the additional $82.9 million buyback is not tied to a specific price. There are also many other benefits brought on by a share buyback program given that it will reduce the number of outstanding shares by over 10 percent. Since it was financed out of cash on hand and not earnings, the reduction should boost the earnings per share. Some of this may be priced into the stock, but it is still a benefit worth mentioning.

Sybase is also quickly turning itself around after being left for dead not long ago. The software-maker announced record earnings in 2007 with a 17 percent increase in revenues and 26 percent increase in net income, which indicates that it has been improving its profit margins. Meanwhile, the company is continuing to take a larger portion of the database market from competitors like Sun Microsystems who had the opportunity to acquire the company on the cheap not long ago! In the end, these factors all make SY a stock worth watching closely over the next few months!

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