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  • Author:
  • Publish date:'s DAILY BULLETIN

April 25, 2000

Market Data as of Close, 4/24/00:

o Dow Jones Industrial Average: 10,906.10 up 62.05, 0.57%

o Nasdaq Composite Index: 3,482.48 down 161.40, -4.43%

o S&P 500: 1,429.86 down 4.68, -0.33%

o TSC Internet: 756.35 down 34.78, -4.40%

o Russell 2000: 468.54 down 13.30, -2.76%

o 30-Year Treasury: 105 04/32 down 27/32, yield 5.856%

Companies in Today's Bulletin:

Microsoft (MSFT:Nasdaq)


Exodus Communications (EXDS:Nasdaq) (AMZN:Nasdaq) (DSCM:Nasdaq)

In Today's Bulletin:

o Biotech/Pharmaceuticals: Celgene Gets Swatted With FDA Warning About Off-Label Thalidomide Sales
o Wrong! Rear Echelon Revelations: Crystal Ball Was Pretty Clear
o Evening Update: Harmonic, C-Cube Ink Semiconductor Deal; Posts a Healthy Quarter
o Bond Focus: Long Bond Whacked in Light Trading

Also on

Internet: Exodus Drops 23%, Despite Surpassing Expectations by 3 Cents

Investors fled Exodus after it said its loss widened on acquisition-related costs and higher expenses.

Internet: A Close Look at the Top Dog

Many are wondering when Amazon, the leader of the e-commerce pack, will produce those elusive profits.

Market Features: Pros Don't See a Nasdaq Bottom Yet

Even the late-day bounce doesn't leave a lot of professional investors convinced we've seen the lows.

Brokerages/Wall Street: J.P. Morgan to Sell Research Via Internet Audio

Partnership with Audible part of continuing plan to develop more Internet-based features.

Biotech/Pharmaceuticals: Celgene Gets Swatted With FDA Warning About Off-Label Thalidomide Sales


Dane Hamilton

Staff Reporter

4/24/00 7:23 PM ET


(CELG) - Get Free Report

shares fell as much as 16% Monday on worries that regulatory concerns could strangle sales growth.


Food and Drug Administration

Friday slapped the Warren, N.J., company with a strongly worded warning letter that alleged Celgene illegally promoted its biggest drug, thalidomide. According to some estimates, Celgene derived some 90% of its revenue in 1999 from sales to cancer patients, a use that regulators haven't approved for the drug.

A hedge fund manager who is short Celgene and asked to remain anonymous said the warning letter could force Celgene to severely curtail its promotion of the drug until it is approved for other uses, which could hamper sales growth and trim the stock's $2 billion valuation.

"This is the first indication that we have that the company has been generating sales through off-label promotion," said the hedge fund manager, who believes the stock is overvalued. "It may not be sustainable."

Celgene representatives didn't immediately return calls seeking comment.

Celgene shares dropped 4, or 11%, Monday to close at 32, well off their early March high of 62 5/16 but still comfortably above the 4 1/2 they traded at last August. Celgene was among the scores of biotech stocks that rode a wave of investor optimism, beginning last summer, to sky-high valuations that have since steadily eroded.

Up and Down at Celgene
Once-hot biotech stock now taking lumps with the Nasdaq

Source: BigCharts

Thalidomide, the morning-sickness drug that caused severe birth defects some 40 years ago in Europe, is sold by Celgene as a treatment for complications of leprosy under the brand name


. Because very few people have leprosy in the developed world, it's a tough market for drug companies under intense pressure to grow revenue and earnings.

According to the FDA, Celgene salespeople promoted the drug as a treatment for various cancers, including multiple myeloma, a blood cancer, and even as a drug that could improve patients' moods.

One salesperson told a cancer specialist that the drug was "good for weight loss," that it could be used as "an appetite stimulant," and that it is "a great drug for feelings of general well-being," the FDA charged in its warning letter to the company.

Though the drug is being tested for use in treating various cancers, Celgene is proscribed from selling it for any use other than leprosy. In general, it's legal for doctors to prescribe drugs for such off-label uses, but improper for drug companies to actively promote them that way.

Given thalidomide's notorious history, one would think Celgene would be very careful about how it markets the drug, particularly because the FDA can delay drug approvals for companies that it views as violators. But Friday wasn't the first time the FDA cited Celgene for infractions. In 1998, it warned Celgene several times for off-label promotion of Thalomid and failing to properly disclose its "severe risks."

"Perhaps more than any other available drug, the need to provide and distribute thalidomide responsibly is essential to the public health," the FDA said in its warning letter, dated April 21.

Thalomid was Celgene's first product and now makes up the vast majority of its 1999 revenue of $26.2 million, which rose from $3.8 million in 1998.

But some sell-side analysts said the impact is likely to be small. Oncologists are just as willing to try new treatments with their severely ill patients as drug companies are willing to sell them new drugs, they said.

"The FDA issues these warnings all the time," said Michael King, analyst with

Robertson Stephens

, which has a buy rating on the stock and hasn't done underwriting for it. He said there are 180 different studies of thalidomide in recent years and that off-label use is common.

U.S. Bancorp Piper Jaffray

analyst Peter Ginsburg estimated that 90% of Thalomid's sales are for cancer. Monday, Ginsburg reiterated a strong buy rating on the stock, based on the view that the FDA warning will have little impact on the stock.

Wrong! Rear Echelon Revelations: Crystal Ball Was Pretty Clear


James J. Cramer

4/24/00 5:01 PM ET

People really wanted to believe in


(MSFT) - Get Free Report

. If they didn't want to believe in Microsoft, they wanted to believe that Microsoft was just being its usually cautious self. If they didn't want to believe Microsoft was being cautious, they wanted to believe that there was a conspiracy to show Washington that Microsoft is simply a pitiful helpless one-time giant.

Herb Greenberg

has his


. I just have my email. But my email Thursday night was so overwhelmingly of the "Cramer, you stupid bald-headed idiot for selling Microsoft at the bottom" type that I actually gave you the blow by blow of what

happened and why we sold at 76, 2 points below the close of that day's trading.

By Friday midday I had more than 40 "you don't know a bottom when you see one, dummy" emails, and another 30 that were of the "You caused the bottom, you jerk, I hope you never get back" variety. But I did get a few that thanked me for the heads-up and for the truth. How much easier it would have been for me to be able to write, "Usual cautious b.s., I am buying."

Alas, however, it would not have been true.

Anyway, I didn't get any emails today that said I was wrong. That's the greatness of this market. If you read my column you could have gotten out at 74. (Big market there after the call.) So not only was I right, but you could have acted on it with me.

Will Microsoft come back? Sure, someday. Was it worth selling? Yes. And that's all that matters.

James J. Cramer is manager of a hedge fund and co-founder of At time of publication, his fund had no positions in any stocks mentioned. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at

Evening Update: Harmonic, C-Cube Ink Semiconductor Deal; Posts a Healthy Quarter


Tara Murphy

Staff Reporter

4/24/00 7:44 PM ET


(HLIT) - Get Free Report


C-Cube Microsystems

(CUBE) - Get Free Report

said their shareholders approved a deal that would merge C-Cube's


group with Harmonic and then spin-off C-Cube's semiconductor unit.

The terms call for C-Cube's holders to get 0.5427 shares of Harmonic for each share of C-Cube they own and will also receive shares from the semiconductor spin-off. Harmonic, a fiber-optic product maker and C-Cube, a digital solutions provider, said the deal should be completed during he first week in May, with the spin-off's record date set at April 25.

In other postclose news (earnings estimates from

First Call/Thomson Financial

; earnings reported on a diluted basis unless otherwise specified):

Mergers, acquisitions and joint ventures


(DEX) - Get Free Report

said it would meet again to consider offers and other strategic options that involve the company's future. The company said its board gave management and its advisors the OK to continue to work towards finding a solution.

According to an


filing, Dexter reviewed a $1.04 billion offer from

International Specialty Products


. The $40-per-share offer now carries a value that would enable Dexter holders to receive further payment if International Specialty sold Dexter's interest in

Life Technologies

for more than $50 a share.

Earnings/revenue reports

Concentric Network


posted a first-quarter loss of $1.07 a share, excluding a gain. The eight-analyst estimate called for a loss of 75 cents, while the year-ago loss of 75 cents includes items.


posted a first-quarter loss of 86 cents a share, narrower than the eight-analyst estimate of a $1.02 loss.

For a look into this evening's after-hours trading action, please check out's

The Night Watch.

Bond Focus: Long Bond Whacked in Light Trading


Elizabeth Roy

Senior Writer

4/24/00 6:02 PM ET

The Treasury market ended mixed, with short-maturity instruments little changed, the benchmark 10-year note down modestly and the 30-year bond down significantly.

Market analysts blamed a combination of a negative technical backdrop and continued fallout from

Thursday's buyback operation for the fate of the long bond, which fell 23/32 to 105 6/32, lifting its yield 5.1 basis points to 5.880%.

Meanwhile, pain in the

Nasdaq Stock Market

supported short-maturity Treasuries, a proxy for cash, market watchers said.

There were no economic releases or other events affecting bond trading. Volume was exceedingly light, reaching just $21.7 billion by 3 p.m., according to tracker


-- 28.4% below the average for a Monday over the last month.

The technical situation affecting the bond, according to

A.G. Edwards

strategist Bill Hornbarger, was that the June

bond futures contract listed on the

Chicago Board of Trade

closed below a key upward-sloping trend line twice last week. "That changes people's perception of what's happening," he said.

Hornbarger added that the latest

Commitments of Traders

report by the

Commodity Futures Trading Commission

, released on Friday, also had bearish implications for the Treasury market. It showed that investors in Treasury futures who also invest in the underlying securities are increasingly short the futures, indicating that "they're seeing less value in the bond."

Meanwhile, there was probably some selling by people who expected to unload long Treasuries in last Thursday's buyback but who did not offer the bonds at a price low enough to be accepted, Hornbarger said.

The 10-year note fell 6/32 to 103 15/32, lifting its yield 2.5 basis points to 6.025%. The five-year note fell 2/32 to 98 15/32, lifting its yield 2.1 basis points to 6.266%. The two-year note was unchanged at 100 6/32, its yield 6.388%.

Falling Nasdaq stock prices didn't provide more support to the Treasury market,

Barclays Capital

senior economist Henry Willmore said, because the other major stock proxies fared better. The action reflected "a realistic view that what's going on with the Nasdaq is not as important as the broader market" when it comes to influencing the economy, and "the broader market is down only a modest amount this year," he said. "In the absence of a significant move down, recent

economic data" -- the

Consumer Price Index in particular -- "would argue for higher bond yields."

Traders may also be unwilling to buy Treasuries aggressively ahead of key economic reports due out later this week. Thursday brings the

Employment Cost Index and

GDP, both for the first quarter. The ECI in particular has the potential to alter the prevailing view of how much the

Fed will hike the

fed funds rate in the months ahead to slow the economy. Traders of

fed funds futures currently expect the rate to rise to 6.5% by September from 6% today.

Currency and Commodities

The dollar fell slightly against the yen and rose against the euro. It lately was worth 105.76 yen, down from 105.77. The euro was worth $0.9376, down from $0.9381. For more on currencies, please take a look at



Currencies column.

Crude oil for May delivery at the

New York Mercantile Exchange

rose to $26.04 a barrel from $25.88.


Bridge Commodity Research Bureau Index

fell to 211.81 from 212.78.

Gold for June delivery at the


fell to $281.20 an ounce from $281.50.


Brenda Buttner on Your World with Neil Cavuto

Tuesday, April 25

Brenda Buttner will be the Guest Host of "Your World with Neil Cavuto" this week, 4/24-4/28 on The Fox News Channel.

"Your World with Neil Cavuto" airs at 5 p.m. EDT.

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