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Just Answers - A Cheap Strategy to Play Microsoft
Bill Gates is super rich but his once high-flying software company has been in the doldrums since mid-2002 after falling fr
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
om the $35 level. The problem with Microsoft (MSFT) has been its failure to grow both its revenues and earnings at the supe
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
rlative rates the company once enjoyed.
Any company the size of Microsoft, with a market-cap of $242 billion, will find gr
Any company the size of Microsoft, with a market-cap of $242 billion, will find gr
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
owth an issue because of its size. But this is not to say the stock is dead. Far from it, Microsoft remains a viable long-t
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
rm software company and is cash rich with $34 billion or $3.28 per share in cash. This gives the stock plenty of financial
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
flexibility to develop or buy growth technologies. Microsoft just announced it would spend $1.1 billion in R&D at its MSN I
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
nternet unit in the FY07. And according to the Wall Street Journal, Microsoft is exploring the possibility of taking a stak
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
in Internet media company Yahoo (YHOO) to take on Internet advertising behemoth Google (GOOG).
But with an estimated five
But with an estimated five
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
-year earnings growth rate of a pitiful 12%, the company has its work cut out for it. Trading at 16.30x its estimated FY07
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
EPS of $1.44, the stock is not expensive but appears to be priced not as a growth stock.
Its PEG on the surface of 1.51 is
Its PEG on the surface of 1.51 is
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
not cheap, but if you discount in the cash of $3.28 per share, the estimated PEG falls to around 1,0, a decent valuation. A
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
lso, if Microsoft can improve on its estimated 12% growth rate, the PEG would decline further.
The fact is Microsoft at th
The fact is Microsoft at th
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
e current price deserves a look. If you want to play the stock but don’t want to shell out the $2,347 for a 100-share block
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
, you may want to take a look at the long-term options, also known as LEAPS. For instance, the in-the-money January 2008 $2
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
.50 Microsoft Call LEAPS not set to expire until January 18, 2008 currently costs $380 a contract (100 shares).
This means
This means
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
you risk a total of $380 for the chance to participate in the potential upside of 100 shares of Microsoft over the next 20
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
months. The breakeven price is $26.30. If Microsoft breaks $26.30, you would begin to make money on your LEAPS. Conversely
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
if Microsoft fails to do anything, your maximum risk is $380 on the initial option play.
Warning: The aforementioned exam
Warning: The aforementioned exam
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ple is for illustrative purposes only and not to be construed as an actual option strategy. Due to the higher risk inherent
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
in options, I recommend you speak with an investment professional before deciding to employ any strategy involving options
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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