DECEMBER 7

Pearl Harbor was attacked 64 years ago today. Less than four years later (August 15, 1945), from pretty much a standing start, we had defeated the giant Nazi and Japanese war machines and had become, for a few short years, the world’s only superpower.

On September 11, 2001, we were attacked again and by the next day had the goodwill of virtually the whole world on our side. More than four years later (December 7, 2005), we have played into the hands of our attacker, increased the ranks of our enemy, and stretched our military dangerously thin.

The main thing is to figure out what to do now – John Murtha and others are offering alternatives. Even so, the feeling still eats away at me that (see, too, yesterday‘s ‘grading’ of our homeland security) this all could have been done so much better.

TEEVEE, TEEVO, IT’S OFF TO WORK I GO
N-T-M-D, N-T-M-D . . . TEEVEE, TEEVEE, TEEVEE, TEEVO

Craig Gawel: ”My name Is Earl’ is moving to Thursday.’

☞ And I accidentally switched Jon Stewart’s timeslot with Nightline’s yesterday. Sloppy! But you see, with TiVo, one need not remember any of this. It keeps track for you.

I even bought back a few TiVo shares at $5.15 last month. I didn’t tell you because (a) what do I know about TiVo that you and the rest of Wall Street don’t know? And (b) the company certainly faces a lot of challenges.

But TiVo has become such a brand name, with such an affectionate following, it wouldn’t amaze me to see some big player pay $1 billion for it – a double.

When I compare TiVo’s market cap with that of Nitromed, say (the two were almost identically valued when I bought my TiVo shares), I just have to think TiVo is the more interesting speculation. One has a pill that combines two generics for the slight added convenience of a few thousand patients; the other has a few million people completely dependent on it for their continued happiness and well-being (well, if not millions, at least me), and at about a tenth the cost.

Speaking of which, Nitromed was down $1.08 yesterday to $14.12 on volume of 2.3 million shares, which means that those of you who bought puts in July, with the stock at $22, should be deep into the money. But what should you do now?

One small investor on a message board asked today:

> Davo3795: How low will it go before the shorts cover? Any guesses?

To which another poster, whose annoying writing style sounds so much like mine that I’d swear it was me (but who can tell? no one uses their real names on these boards) replied:

> Buydil: Well, some shorts probably are covering today – I can’t imagine a lot of other people rushing in to buy 2 million shares.

But why do you assume shorts want to cover and trigger a taxable event? The best scenario for shorts is NEVER to cover. To have the stock fall close to zero . . . as so many well-meaning start-ups do . . . yet never become entirely worthless (which the IRS views the same as a sale, thus triggering the tax).

The value proposition of this company is, in essence, instead of “take two aspirin and call me in the morning,” take ONE, which is undeniably more convenient — but at six times the price, an extra $2,000 or so a year.

The longs feel that’s insignificant, because the taxpayer and insured population will absorb most of the cost, not the patient, who merely pays a co-pay.

But remember: this pill is not for ALL black congestive heart failure sufferers, just for some subset of the 20% or so sufficiently far along to need it.

And many of them are *already* on the generic combo.

And most are *already* taking a great many pills each day, so that switching to BiDil wouldn’t cut their pill-taking in half, but maybe from 20 pills a day to 17 or something like that. An improvement, certainly, but maybe not worth $2,000 extra a year.

Remember, the BiDil label calls for TWO BiDil three times a day (6 pills) with each two totaling a dose of 20 mg isordil and 75 mg hydralazine.

That dosage can be EXACTLY matched by one 20 mg isordil, one 50 mg hydralazine and one 25 mg hydralazine.

So, assuming the doc wants to prescribe the precise same dosage for every patient regardless of the specific situation (which I doubt, but that’s the longs’ view), one way to get 75/20 is with 2 pills, the BiDil way ($2,500 or so a year); the other is with 3 pills, the generic way ($500 or so).

The current prescription rate for BiDil does not suggest that this incredible medical breakthru (forgive the sarcasm) is catching fire.

So, as usual . . . there are no guarantees, but if you went into this with money you could truly afford to lose: don’t sell your puts. Even at $14, the company is still valued at more than $400 million. That’s a lot to pay for a small company with a single product losing several million dollars a month.

 

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