Canaccord Genuity on MSCI, Cell Therapeutics, and Fifth & Pacific

By Canaccord Genuity  OCT 03, 2012 2:35 PM

MSCI shares are pummeled, Cell Therapeutics jumps higher, and Fifth & Pacific slashes its profit outlook for the year.


The following are excerpts from Canaccord Genuity analysts' commentaries.

MSCI (NYSE:MSCI): I thought we were friends!

Shares of MSCI were pummeled on Tuesday after Vanguard Group said it was switching 22 of its largest index funds away from benchmarks provided by MSCI to cut costs. Vanguard was MSCI’s largest index licensing client and the change is expected to affect both ETFs and mutual funds. Vanguard is shifting six international funds with $170 billion of assets to track indexes provided by the FTSE group while 16 US, stock and balanced funds with $367 billion in assets will switch to indexes developed by the University of Chicago’s Center of Research in Security Prices (CRSP). Additionally, four Canadian ETFs will see their benchmarks change with three going to FTSE indexes and one going to a CRSP index.

MSCI said the switch will be phased in over a number of months starting in January 2013 and will represent a loss in roughly $24 million in licensing fees. CEO Henry Fernandez said that ETF managers’ choice of index provider “may not be as sticky as we all thought. That said, BlackRock (NYSE:BLK) said it would stick with MSCI indexes on its iShares family of funds, calling the “the gold standard of global and international equity indexes.”

Cell Therapeutics (NASDAQ:CTIC): “The most beautiful words in the English language are not ‘I love you,’ but ‘It’s benign.’” – Woody Allen

Cell Therapeutics jumped higher after company said the FDA awarded orphan drug incentives to its brain cancer drug Opaxio. The company is studying Opaxio as a treatment for glioblastoma, the most common type of brain cancer. The FDA’s decision means Opaxio is eligible for fee waivers and tax incentives, and if the drug is approved it could have up to seven years of marketing exclusivity. For the unfamiliar, orphan drug status is awarded to drugs that are intended to treat rare diseases.

Cell Therapeutics said glioblastoma is typically treated with surgery and a combination of chemotherapy and radiation. It said 10,000-12,000 cases are expected to be diagnosed in the US in 2012. Opaxio is a version of the chemotherapy drug paclitaxel, designed to deliver larger amounts of paclitaxel directly to tumors while reducing the amount of the drug that reaches healthy tissue. Fifth & Pacific (NYSE:FNP): The Juicy has gone sour. 

Fashion company Fifth & Pacific late Monday slashed its profit outlook for the year, citing difficulties at its struggling Juicy Couture brand in selling apparel at full price. The company formerly known as Liz Claiborne lowered its adjusted EBITDA forecast to now range of $100-115 million, down from a prior $125-140 million. Earlier this year, CEO William McComb said Juicy Couture’s business would start improving in the second half of 2012, with same-store sales rising by 10%. Instead, they fell 1%. “Juicy is taking a step backwards,” McComb told analysts on Monday.

Indeed, it seems the once-hot brand beloved for its velour track suits with an urban look has fallen out of favor with many shoppers, who have come to their senses. McComb said there were “significant shortfalls in full-price” selling at Juicy Couture, a trend he expects will continue in the fourth quarter, which includes the holiday season. To address Juicy's problems, McComb said Fifth & Pacific would ship more merchandise to higher grossing stores, be quicker about getting unsold merchandise into outlets and out of its regular stores, and cut costs.

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