We have heard endlessly about the Northwest-Delta merger and the Continental-United proposed merger, from which Continental walked away. This has become more topical given Microsoft and Yahoo acquisition games. We know cost cutting, synergies, efficiencies and scale to be primary reasons for a merger. So, it would follow that when the above mentioned factors are not in play, a merger is not a good idea. But is that why Continental walked away from a merger with United?
These are the typical factors that are considered in an airlines merger.
Scale: The Continental-United Merger would have created the world’s top ten carriers, even though, these airlines are separately part of that list, which is measured in annual RPKs (revenue passenger kilometers, (in millions)
1. American (224)
2. Air France/KLM (197)
3. United (189)
4. Delta (159) *
5. Continental (127)
6. Northwest (117) *
7. British Airways (115)
8. Lufthansa (110)
9. Southwest (109)
10. Japan Airlines (96)
* Delta and Northwest have since merged creating the world's biggest airline.
Complementary Routes: Continental’s presence in Europe, Asia and the Middle East would have complemented United’s presence in Asia and Australia.
Aircraft Integration: Continental operates an all-Boeing family of 737s, 757s, 767s and 777s. United, too, flies each of these. The only additions would be United's Airbus A320 and Boeing 747 fleets.
Employee Assimilation: The employees of both airlines will have to be integrated and this has historically been painful with seniority lists and benefits having to be restructured. So, this might have been a reason for pause in the otherwise media created foregone conclusion.
But the Continental Chief Executive and President wrote to their employee was that they decided to pursue the alternative route of forging alliances instead of merging operationally with another company. From what we know, one reason to walk away from the merger was to not put Continental at risk, financially and operationally even though Kellner would have been slated to run the combined entity.
The lesson here is that sometimes, a merger does not make sense despite the industry wide call to do so. This is especially true if one of the companies is profitable and well run and the other one is not. An alliance is probably going to give Continental all that it would have gotten from a merger with United but without the integration hassle and a hefty price tag. A merger is not good if it is not good for the shareholders and it is not a good option when it is not good for the employees of either companies, sans the regular attrition such events suffer.
But alliance or not, merger or not, this hardly would have been game changing in this very mismanaged industry. As we go forward in this globalized world, travel is only going to increase both for business and leisure.
So, what can the airlines do to save themselves?
-Understand the key drivers of profitability
-Develop businesses so that key drivers remain key both in strategy and execution
-Take preemptive action to keep those drivers protected
-Understand the consumers’ unspoken requirements
-Redesign processes to maximize the value captured across the chain
Thursday, July 31, 2008
Joint Ventures
The business reasons for a joint venture include synergies without the expensive price tag of the integration aspect. There also could be the transfer of know how for a market share. But a very critical reason is to gain entry into a foreign market, where the host company might not necessarily have operations before. And, that is also the reason the cultural aspect of the equation is very important. Another reason is foreign ownership isn’t completely allowed by the government.
Wall Street Journal's announcement that Danone and Wahaha are breaking up the joint venture and going their separate ways raises an interesting set of questions.
If the joint venture was successful for 12 years, can we attribute the problems to cultural issues? Probably not. These kinds of issues typically do not take that long to surface.
Could it mean that now that Danone has made its entry into the Chinese market, it is more beneficial for Danone’s bottom line to operate as an independent brand? Will claiming brand independence result in more brand ubiquity?
If Wahaha has control of a number of factories outside the joint venture, is this part of the joint venture agreement? If yes, why the objection now? If not, why did this not come to light before?
What is the legal recourse for both the parties of this joint venture?
As the article suggests, there are questions surrounding the valuation of the venture itself. It will be interesting to see how this case unfolds. Joint ventures or alliances are sometimes the way to go when companies don’t go the way of a merger or an acquisition. As to the success of such ventures, I do not think the results will swing the pendulum enough to speak to the viability of such ventures. But, maybe it will provide us with valuable lessons going forward, especially in the case of cross border ventures, be it a JV, an acquisition or a merger.
The complete WSJ article can be read here.
Wall Street Journal's announcement that Danone and Wahaha are breaking up the joint venture and going their separate ways raises an interesting set of questions.
If the joint venture was successful for 12 years, can we attribute the problems to cultural issues? Probably not. These kinds of issues typically do not take that long to surface.
Could it mean that now that Danone has made its entry into the Chinese market, it is more beneficial for Danone’s bottom line to operate as an independent brand? Will claiming brand independence result in more brand ubiquity?
If Wahaha has control of a number of factories outside the joint venture, is this part of the joint venture agreement? If yes, why the objection now? If not, why did this not come to light before?
What is the legal recourse for both the parties of this joint venture?
As the article suggests, there are questions surrounding the valuation of the venture itself. It will be interesting to see how this case unfolds. Joint ventures or alliances are sometimes the way to go when companies don’t go the way of a merger or an acquisition. As to the success of such ventures, I do not think the results will swing the pendulum enough to speak to the viability of such ventures. But, maybe it will provide us with valuable lessons going forward, especially in the case of cross border ventures, be it a JV, an acquisition or a merger.
The complete WSJ article can be read here.
Outsourcing and Innovation
The Business Insights section of the Wall Street Journal presented an article on how Offshore Outsourcing can impact customer satisfaction. The line of reasoning was that if the labor cost arbitrage is used for increasing investments in technology or customer services, the company will see an increase in customer satisfaction. Corollary, the arbitrage savings from non-customer services functions, if invested might not show up as increases customer satisfaction.
While this is well researched and true, I propose another way to think about this.
If the cost saving received from labor arbitrage is significant enough, check and recheck that premise that the company is saving money. The desire to show savings and therefore improve the bottom line is so great, especially in today’s short-term Wall Street driven company strategies that functions might be offshored that are very critical to the business. I had read excerpts of an interview by an ING Direct executive, who seriously questioned the prevailing wisdom of outsourcing the customer service function.
A report by McKinsey identifies three main innovation challenges faced by financial institutions. These are ‘limited use of customer insights and external idea networks; lack of organizational mechanisms, such as dedicated innovation funding; and poor capabilities in specific areas critical to innovation’. When companies are so focused on their bottom line as to go around the globe in the eternal labor cost chase, what is lost is more than the short term growth potential. They lose the ability to innovate and generate sustainable growth over the long term. When that happens, growth becomes more a function of luck than strategy.
I am going to tie the findings above to my case for a well thought out outsourcing plan.
Outsourcing really serves an organization best when a function is outsourced for significant savings but when there are opportunities for the outsourcing partner to collaborate with the outsourcing organization. If we can pull innovation from various such channels, we have begun to form an innovation strategy around external idea networks.
The next step is to then to look at our complete supply chain and evaluate how might the organization collaborate more rather than have a supplier/client relationship. An honest and spirited exchange of feedback is one of the best and least inexpensive ways to elicit innovative ideas.
The savings realized from outsourcing should be spent according to organizational priorities. That said, innovation focuses on top line growth rather bottom line savings and anytime that is the focus, the organization has a chance to reinvent itself or capture a greater piece of the value chain thereby improving its’ capabilities.
The Business Insights article can be accessed here.
The McKinsey report referred to above can be accessed here.
While this is well researched and true, I propose another way to think about this.
If the cost saving received from labor arbitrage is significant enough, check and recheck that premise that the company is saving money. The desire to show savings and therefore improve the bottom line is so great, especially in today’s short-term Wall Street driven company strategies that functions might be offshored that are very critical to the business. I had read excerpts of an interview by an ING Direct executive, who seriously questioned the prevailing wisdom of outsourcing the customer service function.
A report by McKinsey identifies three main innovation challenges faced by financial institutions. These are ‘limited use of customer insights and external idea networks; lack of organizational mechanisms, such as dedicated innovation funding; and poor capabilities in specific areas critical to innovation’. When companies are so focused on their bottom line as to go around the globe in the eternal labor cost chase, what is lost is more than the short term growth potential. They lose the ability to innovate and generate sustainable growth over the long term. When that happens, growth becomes more a function of luck than strategy.
I am going to tie the findings above to my case for a well thought out outsourcing plan.
Outsourcing really serves an organization best when a function is outsourced for significant savings but when there are opportunities for the outsourcing partner to collaborate with the outsourcing organization. If we can pull innovation from various such channels, we have begun to form an innovation strategy around external idea networks.
The next step is to then to look at our complete supply chain and evaluate how might the organization collaborate more rather than have a supplier/client relationship. An honest and spirited exchange of feedback is one of the best and least inexpensive ways to elicit innovative ideas.
The savings realized from outsourcing should be spent according to organizational priorities. That said, innovation focuses on top line growth rather bottom line savings and anytime that is the focus, the organization has a chance to reinvent itself or capture a greater piece of the value chain thereby improving its’ capabilities.
The Business Insights article can be accessed here.
The McKinsey report referred to above can be accessed here.
Wednesday, April 30, 2008
State Subsidies
I was reading about corporate welfare at the Ludwig von Mises Institute. Christopher Westley states and I quote ,’ As hard as it may be for the arrogant state development community to believe, the vast majority of economic growth that occurred in the United States was actually coordinated without any such central planning boards.’
I had made a similar case in point against state subsidy on my blog albeit without the research. San Francisco and New York did not become great cities because of tax subsidies.
State Corporate Income Tax is based on a three factor formula, which affects the plant, workforce and point-of-sales locations. In today’s global work environment, workforce and point of sales locations might not be a concern for Internet businesses. The plant might also be a mute point. So, the question is how do we go past this antiquated concept of attracting high growth companies?
There was a study conducted by a former Michigan governor that concluded that the best long-term strategy for attracting business was to maintain a simple, low-tax and low-regulatory business environment.
Even a country such as, Albania introduced a flat tax rate of 10% to attract international investors. So, why are we not doing this? This is tantamount to saying, tax anything that is productive and efficient. Make them pay for being smart to compensate for the rest who might not be.
I had made a similar case in point against state subsidy on my blog albeit without the research. San Francisco and New York did not become great cities because of tax subsidies.
State Corporate Income Tax is based on a three factor formula, which affects the plant, workforce and point-of-sales locations. In today’s global work environment, workforce and point of sales locations might not be a concern for Internet businesses. The plant might also be a mute point. So, the question is how do we go past this antiquated concept of attracting high growth companies?
There was a study conducted by a former Michigan governor that concluded that the best long-term strategy for attracting business was to maintain a simple, low-tax and low-regulatory business environment.
Even a country such as, Albania introduced a flat tax rate of 10% to attract international investors. So, why are we not doing this? This is tantamount to saying, tax anything that is productive and efficient. Make them pay for being smart to compensate for the rest who might not be.
Monday, April 7, 2008
Problem Solving...A fine example
Had Aaron Spelling been alive today, he probably would not have liked this news about flight engines shutting down TEMPORARILY in violent weather conditions. I have highlighted the temporary in caps lest some of us suffer from a full fledged panic attack.
Having said that though, I want to bring to light the effective way in which the various agencies have worked together to investigate the issue, respond in a timely manner and mitigate the risks along the way. The FAA, NTSB, engine manufacturers, and the airlines and of course the pilots all readily shared information.
The result is that FAA is issuing new flight procedures. The Safety Board issued recommendations. FAA has more stringent standards for newly designed engines to mitigate the risk of a mid-air shut down of the engines because of icing. Safety bulletins were released and engine-control software has been revised.
It seems that there are a few lessons here for the other industries in turmoil.
1. These would be to engage stakeholders in a timely, mutual and consensual manner. There was a sign at the door that said, ‘Check your egos at the door’. Inside the conference room, the sign said, ‘The Problem is the Focus, Not You’.
2. Keep the Number One priority the Number One priority. It was passenger safety.
3. The ‘Blame Game’ was not in effect. The party was strictly 'Problem Solving’ and if you couldn’t contribute, you were not invited to the party because of your title. Notice how the CEOs didn't create headlines with misinformation while the real technical experts went about solving the problem.
4. Even though the nature of the problem was unknown to begin with, we didn’t see people running around like headless chicken propounding mindless theories and creating panic driven disasters.
5. The best lesson here was that the active participants, namely the pilots, were actually interviewed for their version of what happened. That was also what tipped off the technical experts to the nature of the problem. Sometimes, it is best to interview those having to deal with the problem directly instead of letting a committee attempt to solve the problem in an ivory tower.
Having said that though, I want to bring to light the effective way in which the various agencies have worked together to investigate the issue, respond in a timely manner and mitigate the risks along the way. The FAA, NTSB, engine manufacturers, and the airlines and of course the pilots all readily shared information.
The result is that FAA is issuing new flight procedures. The Safety Board issued recommendations. FAA has more stringent standards for newly designed engines to mitigate the risk of a mid-air shut down of the engines because of icing. Safety bulletins were released and engine-control software has been revised.
It seems that there are a few lessons here for the other industries in turmoil.
1. These would be to engage stakeholders in a timely, mutual and consensual manner. There was a sign at the door that said, ‘Check your egos at the door’. Inside the conference room, the sign said, ‘The Problem is the Focus, Not You’.
2. Keep the Number One priority the Number One priority. It was passenger safety.
3. The ‘Blame Game’ was not in effect. The party was strictly 'Problem Solving’ and if you couldn’t contribute, you were not invited to the party because of your title. Notice how the CEOs didn't create headlines with misinformation while the real technical experts went about solving the problem.
4. Even though the nature of the problem was unknown to begin with, we didn’t see people running around like headless chicken propounding mindless theories and creating panic driven disasters.
5. The best lesson here was that the active participants, namely the pilots, were actually interviewed for their version of what happened. That was also what tipped off the technical experts to the nature of the problem. Sometimes, it is best to interview those having to deal with the problem directly instead of letting a committee attempt to solve the problem in an ivory tower.
Tuesday, April 1, 2008
Follow Up on Wal-Mart Case
As a follow up to the case of a former employee of Wal-Mart, who was being sued by the company, the latest news is that Wal-Mart has reconsidered it’s decision and will be withdrawing the case.
This is clearly a win for logic and humanity over bad business practices, however lawful they might have been.
This is clearly a win for logic and humanity over bad business practices, however lawful they might have been.
Thursday, March 27, 2008
Lessons in Crisis Communication
Most everyone is shell shocked at the way Bear Stearns’s stock fared in the last few days and with how quickly (if not cruelly) the decision to buy it at $2 a stock was reached. The blogosphere as one would imagine has been lit up with emphatic posts. A few are questioning the competence of the senior executives at the firm, a few are questioning the merits of the decision to buy it out right and a few are lamenting their misfortunes or loss of savings.
Comments here suggest that it would not be a stretch to try the CEO and the Board of Directors for gross negligence or willful misconduct. Angry allegations are being hurled back and forth regarding failure to disclose the gravity of the situation.
That brings us to the something called communication. In such situations, rumors cannot be contained, especially with all the wonderful technology we have at our disposal. How do you quash rumors even when they are the most bizarre? How do you communicate confidence to your employees? How do you communicate in a sincere and honest manner as opposed to a preference for keeping everything hushed till a rumor is no longer a rumor and turns into a veritable fact? How do you navigate such choppy waters? A lesson might be drawn from WSJ’s account of how Lehman handled this at their firm.
1. Open and honest communication along with acceptance of facts
2. All Hands on Deck (even if it was a weekend)
3. Communication even if someone is in-flight
4. Asking for help before your life depends on it or it is too late
5. Communication with all employees regardless of their title
6. Coordination with other agencies
7. Act in a manner that inspires confidence
That there are angry investors just reaffirms that there is something to be said about investor activism. It pays to be vigilant. At least, that way when fortune swings such as these happen, one can sleep easy knowing one did the right thing.
Comments here suggest that it would not be a stretch to try the CEO and the Board of Directors for gross negligence or willful misconduct. Angry allegations are being hurled back and forth regarding failure to disclose the gravity of the situation.
That brings us to the something called communication. In such situations, rumors cannot be contained, especially with all the wonderful technology we have at our disposal. How do you quash rumors even when they are the most bizarre? How do you communicate confidence to your employees? How do you communicate in a sincere and honest manner as opposed to a preference for keeping everything hushed till a rumor is no longer a rumor and turns into a veritable fact? How do you navigate such choppy waters? A lesson might be drawn from WSJ’s account of how Lehman handled this at their firm.
1. Open and honest communication along with acceptance of facts
2. All Hands on Deck (even if it was a weekend)
3. Communication even if someone is in-flight
4. Asking for help before your life depends on it or it is too late
5. Communication with all employees regardless of their title
6. Coordination with other agencies
7. Act in a manner that inspires confidence
That there are angry investors just reaffirms that there is something to be said about investor activism. It pays to be vigilant. At least, that way when fortune swings such as these happen, one can sleep easy knowing one did the right thing.
Penny Wise and Pound Foolish
We have all heard the expression, Penny Wise and Pound Foolish. Yesterday, I received a not so subtle reminder of the same. Wal-Mart, the big mighty retailer sued a former employee for the amount of $470,000 because she received $417,000 as damages from the trucking company she lost her short-term memory to. According to Wal-Mart’s policy, if the employees receive damages then Wal-Mart is well within rights to ask for the money they spent on an employee. Their spokesperson said they are doing this to be fair to all of their associates.
So, then why do I think it is penny wise and pound foolish? I do because when we make laws such as these we do so to protect the shareholders and to be fair. The amount of negative press that Wal-Mart has received on this alone would be any Corporate Relations’ nightmare. Given that Wal-Mart already was not being portrayed in the best light exacerbates the situation. Negativity is a big value stealer. People don’t want to work for such companies and where there is employee strife, how does one perceive shareholder value is being created. It can be based on profits alone but is that sustainable? And, for how long? Are people not the biggest asset in the retail business and does that not include employees?
So, then why do I think it is penny wise and pound foolish? I do because when we make laws such as these we do so to protect the shareholders and to be fair. The amount of negative press that Wal-Mart has received on this alone would be any Corporate Relations’ nightmare. Given that Wal-Mart already was not being portrayed in the best light exacerbates the situation. Negativity is a big value stealer. People don’t want to work for such companies and where there is employee strife, how does one perceive shareholder value is being created. It can be based on profits alone but is that sustainable? And, for how long? Are people not the biggest asset in the retail business and does that not include employees?
Wednesday, March 12, 2008
Money Speaks
Today I was greeted by a great piece of news in the WSJ, at least from an investor activism result perspective. On one hand there is the mandate to maximize shareholder return and the on the other, there is to invest responsibly. Both sides have their arguments. Fidelity calls it an attempt to micro manage and too prescriptive. The human rights activists are calling the investments as being substantially contributive to genocide.
I think both those arguments are valid and if someone were to look closely, maybe we could come up with a system to prevent any such future tarnished investments. For now, I am happy to report that the ground level investors can make a difference if they so choose. That I believe is the real victory here. Money speaks...and it can be a beautiful language.
I think both those arguments are valid and if someone were to look closely, maybe we could come up with a system to prevent any such future tarnished investments. For now, I am happy to report that the ground level investors can make a difference if they so choose. That I believe is the real victory here. Money speaks...and it can be a beautiful language.
Saturday, March 1, 2008
Cross-Border Mergers - SPAC or Spin Off?
Neptune Orient Lines is in talks with TUI AG to merge to form the world’s third largest container shipping enterprise. Neptune is Singapore based and TUI is a German company.
In order to limit its exposure to TUI’s leisure lines of businesses, Neptune’s parent company Temasek Holdings Pte. Ltd, which is a Singapore state-owned investment company, would prefer to limit its investment to Hapag-Lloyd. This would call for Hapag-Lloyd to be spun off as a separate entity. TUI’s management has so far restricted such demands from TUI shareholders but this might be right impetus for them to spin off Hapag-Lloyd.
What might be another way to achieve what a spin off would provide to the acquiring company? A Special Purpose Acquisition Company (SPAC) that limits the parent company’s exposure to litigation and other risk might be one way to go but that is the perspective from the acquirer. SPACs, also known as blank check companies, allow for an easier way to raise funds for an acquisition, based on the reputation of its founders. It is also considered a back door way to go public, especially in volatile markets. They can be structured so that founders get the majority of the stake in the company. Another way is to spin off the merged entity and have focused and autonomous management. A spin off would be more ideal if the time table is longer than what a SPAC can afford, which is typically 24 months. A spin off would be successful if the spun off entity is diverse enough from the parent companies and is able to get higher valuations as a stand alone entity. How the value in unlocked of often key to the success of a spin off. A spin off is a suitable option when it gives the incumbent management the opportunity to focus on the core business.
Given that this is a cross border merger, would there be other cultural issues that would have to be dealt with in order to spin off or create a SPAC. Since 70% of the mergers fail because of cultural issues, I sure would like to see this as a Case Study of what to do rather than what not to do, which we have seen quite a few.
In order to limit its exposure to TUI’s leisure lines of businesses, Neptune’s parent company Temasek Holdings Pte. Ltd, which is a Singapore state-owned investment company, would prefer to limit its investment to Hapag-Lloyd. This would call for Hapag-Lloyd to be spun off as a separate entity. TUI’s management has so far restricted such demands from TUI shareholders but this might be right impetus for them to spin off Hapag-Lloyd.
What might be another way to achieve what a spin off would provide to the acquiring company? A Special Purpose Acquisition Company (SPAC) that limits the parent company’s exposure to litigation and other risk might be one way to go but that is the perspective from the acquirer. SPACs, also known as blank check companies, allow for an easier way to raise funds for an acquisition, based on the reputation of its founders. It is also considered a back door way to go public, especially in volatile markets. They can be structured so that founders get the majority of the stake in the company. Another way is to spin off the merged entity and have focused and autonomous management. A spin off would be more ideal if the time table is longer than what a SPAC can afford, which is typically 24 months. A spin off would be successful if the spun off entity is diverse enough from the parent companies and is able to get higher valuations as a stand alone entity. How the value in unlocked of often key to the success of a spin off. A spin off is a suitable option when it gives the incumbent management the opportunity to focus on the core business.
Given that this is a cross border merger, would there be other cultural issues that would have to be dealt with in order to spin off or create a SPAC. Since 70% of the mergers fail because of cultural issues, I sure would like to see this as a Case Study of what to do rather than what not to do, which we have seen quite a few.
Lifestyle Banking
I read a very interesting albeit a not so new article about highly personalized banking. They claim and I quote, “Citizens Financial Group (CFG) offers enhanced online banking tools to enable you to personalize your accounts and Internet banking preferences to "fit" your lifestyle. Based on your unique priorities and financial goals, choose high interest savings account rates, customizable banking services and other internet bank account options that will allow for greater banking ease and increase your savings potential.”
A few months ago, I had responded to a question on LinkedIn about future trends in personal financial services. My answer was, “I would think with the New Capitalists in the play, companies that manage money will become much more active and will be able to dictate companies' behaviours. I would highly recommend a book. The New Capitalists: How Citizen Investors Are Reshaping the Corporate Agenda The other trend I see in Financial Services is integrating the global phenomenon in everything. Financial Services will need to cater to global citizens, global companies, etc. New services that might evolve would be highly individualized financial/life management. Let me explain this a little better. Someone who likes to travel once every quarter for leisure, like to drink coffee, spends on golf, wants to pursue advanced education, etc. will have a personalized financial plan as opposed to another person with different goals in life. Though I think that this is more futuristic than the next five years.”
This is a simplisic version of what Citizens Financial Group seems to be offering. It feels good to be able to accurately predict trends, which is a key skill for strategy consulting.
Wednesday, January 9, 2008
Growth vs. Potential Growth
This is my first blog of the year 2008. I wish all of you a Happy and Prosperous New Year.
Now to the actual blog…I read two articles in today’s Wall Street Journal.
One was how Amgen’s CEO raised the earnings expectations for Amgen and I quote directly from the article, ‘Amgen's best hope for recovering growth rests on denosumab, or D-mab, a new treatment for bones made brittle by osteoporosis and chemotherapy that Mr. Sharer has labeled a potential blockbuster.’
And the other article was on how Dr. Donahue while hiking in the Sierra Nevada mountains almost a decade ago pontificated on why bears even after hibernating for up to six months do not suffer from osteoporosis and how that contrasts with humans, who even after a few weeks of inactivity suffer from softer bones. Aursos was founded in 2001 to research this phenomenon and to produce a commercial treatment for humans.
The link between the Amgen article and Dr. Donahue’s Bear Bones article is that one company is betting on a drug that slows the breakdown of bones vs. another one that was formed in 2001 to investigate how the parathyroid hormone in bears can be used to replicate the same bone growth in humans.
Is it an acquisition opportunity for Amgen or is Amgen’s potential blockbuster only that… a potential until the real one comes along? And, then how would investors respond to such a company?
Now to the actual blog…I read two articles in today’s Wall Street Journal.
One was how Amgen’s CEO raised the earnings expectations for Amgen and I quote directly from the article, ‘Amgen's best hope for recovering growth rests on denosumab, or D-mab, a new treatment for bones made brittle by osteoporosis and chemotherapy that Mr. Sharer has labeled a potential blockbuster.’
And the other article was on how Dr. Donahue while hiking in the Sierra Nevada mountains almost a decade ago pontificated on why bears even after hibernating for up to six months do not suffer from osteoporosis and how that contrasts with humans, who even after a few weeks of inactivity suffer from softer bones. Aursos was founded in 2001 to research this phenomenon and to produce a commercial treatment for humans.
The link between the Amgen article and Dr. Donahue’s Bear Bones article is that one company is betting on a drug that slows the breakdown of bones vs. another one that was formed in 2001 to investigate how the parathyroid hormone in bears can be used to replicate the same bone growth in humans.
Is it an acquisition opportunity for Amgen or is Amgen’s potential blockbuster only that… a potential until the real one comes along? And, then how would investors respond to such a company?
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