Sorry Novartis ( NVS), we don't mind a bit of potluck at a dinner party, but we'll pass when it comes to our pain medications. The U.S Food and Drug Administration is cautioning consumers about a potential mix-up between powerful prescription painkillers known as opioids and common over-the-counter drugs made at a Novartis manufacturing plant in Lincoln, Nebraska. Novartis issued a recall of the company's over-the-counter drugs on Sunday and Endo Pharmaceuticals ( ENDP), which sells the opioid drugs made at the Novartis facility, has said it is unaware of any injuries resulting from the mix-up. Then again, maybe the folks mistakenly popping Percocet instead of Gas-X were just too loopy to report the problem. As for why the company is not recalling the potent pain pills along with the upset-tummy tablets, FDA officials say they are essential medications for many patients and "the likelihood of finding a wrong tablet in an opiate pain medication dispensed to patients is low." And who knows? Gas-X may in fact be the mother of all placebos, so it's a win-win for everybody. Nevertheless, regulators are concerned about a potential shortage of Endo's painkillers due to the shutdown of the Nebraska facility and are dealing with it. That said, they should have dealt with quality control at this particular manufacturing facility a long time ago. FDA inspectors cited it for a dozen infractions last summer, according to the agency's website, and pill mix-ups have reportedly been the norm there since 2009. Basel, Switzerland-based Novartis said in a statement said that it issued the recall "at the appropriate time ... as a precautionary measure in the best interest of consumers." No way Novartis. We don't buy it. Judging from all accounts this site should have been scrubbed a long time ago, so your timing is way off. Furthermore, you most certainly should have cleaned up your act after seeing Johnson & Johnson's ( JNJ) stock get slammed after similar plant problems a few years back. You see, if there's one thing we learned from J&J's headaches, it's that you can't cover up serious manufacturing troubles with a Band-Aid.
4. Zynga Gets Zinged
Since Zynga ( ZNGA) is well-known for its Words with Friends game, we here at the Five Dumbest Lab want to take this opportunity to offer our good buddies at the company a few words of wisdom: Stop schnorring off Alec Baldwin and find some paying customers quick! Zynga's stock, which priced at $10 in the online gamer's December IPO, got zinged last Friday and again on Monday after a Wall Street analyst questioned its reliance on a small number of customers for the majority of its revenue. Zynga shares sank below $8 following the report from Macquarie Group's Ben Schachter, who launched coverage of the company with a neutral rating. It turns out only 2.2% of Zynga's 150 million users pay to play its games, says Schachter, and of these paying customers, a mere 680,000 account for over 70% of Zynga's $800 million annual revenue. Schachter estimates the top 20% of paying players spend over $1,100 per year on Zynga games. Schachter refers to the customers forking over real money to buy virtual items -- like barns and chickens in Zynga's FarmVille title -- as "whales." To be honest, we think it's a bit wacko and a waste of money, but, hey, to each his own, and right now those Zynga's fake barns are holding up better than its very real stock. And speaking of wackos, our second piece of advice is for Zynga is to zoom far away from the likes of Baldwin, who famously got ejected last month from an American Airlines ( AMR) flight for refusing to quit playing Words with Friends despite repeated warnings from a flight attendant. While it may seem cool to have the 30 Rock star as an unpaid celebrity endorser, the volatile actor is probably not the kind of whale you want associated with your brand in the long run. With 95% of its sales coming from Facebook, Zynga better make sure the face of its company is not doing something stupid, especially when Electronic Arts ( ERTS), which just launched The Sims Social online, is nipping at their heels. With real enemies like these, who needs virtual friends like that guy?
3. WebMD's Acute Dumbness
Judging from WebMD's ( WBMD) symptoms, our professional viewpoint is that the patient is suffering from a rare case of Acute Dumbness. As for investors who followed the so-called smart money into the sickly stock, well, they probably want their heads examined right now. Shares of the Internet provider of medical information, which counts hedge-fund big-hitters Carl Icahn and George Soros among its big stake holders, went into cardiac arrest Monday, falling 28% on the triple whammy that (1) its CEO Wayne T. Gattinella resigned, (2) the company stopped its sale talks, and (3) it is slashing sales expectations for fiscal 2012. Wow! Even one of these maladies is enough to send a stock to the hospital, but all three at the same time has put this company in critical condition. Let's review. First up, Gattinella has left his position as CEO, President and a member of the board of directors, effective immediately. CFO and COO Anthony Vuolo will take over as interim CEO while the board looks for a replacement. In a statement, the company's chairman Martin Wygod thanked Gattinella for his contributions and promised "a smooth transition as the Board conducts a search for a new CEO." "Smooth," huh? Sorry Marty, but generally a smooth transition means you have a candidate waiting in the wings, ready to take over. That's certainly not the case here. On the other hand, if by smooth you mean seeing your company flatline while on the operating table, well, then you are off to a pretty good start. Next, it was revealed in November that WebMD was exploring a sale process, with Yahoo! ( YHOO) among those rumored to be interested in buying the company. This appears to no longer be the case, although the company did not offer a reason why the talks were terminated with potential acquirers. Then again, maybe they just forgot. According to the Dumbest Lab's studies, amnesia is quite prevalent among companies in the throes of Acute Dumbness. And along those lines, maybe Icahn forgot the shellacking he took the last time he bet on an Internet merger that potentially included Yahoo!. He may not remember his disastrous push to sell Yahoo! to Microsoft ( MSFT) a few years ago, but we do. Finally, WebMD lowered financial guidance for fiscal 2012, saying it expects revenue to be between 2% and 8% lower than 2011, with the first half of 2012 being lower than the second half of the year. In the statement, it cited a "challenging business environment for certain pharmaceutical company customers" as a primary reason for the lower sales forecast. "Challenging"... Oh come on! The economy is growing and health care was one of the best performing sectors last year. The "business environment" is fine. The real challenge is finding a reason to stay in this stock, especially for those who blindly followed Icahn and Soros into it. You see, the treatment for Acute Dumbness is long and expensive. Those guys can afford it. The rest of us can't.
2. Blackstone's Domain Drama
We know the current political environment is shining an unflattering spotlight on the private equity industry, but come on folks, take some pity on the poor folks at Blackstone ( BX). Deep down these masters of the universe really think they "suck." Seriously. Why else would they register "blackstonesucks.com" as a domain name? Okay, okay. We're just kidding. They did it as a defensive maneuver in the wake of leading Republican presidential candidate Mitt Romney's public bashing over his Bain Capital background. That said, Blackstone really is serious about stamping out any cyber-shenanigans related to the company, registering a total of 7 "sucks" domains for various spellings of both its name as well as that of its chairman Stephen Schwarzman, according to Tuesday's Domain Name Wire. In addition to blackstonesucks.com, the domains bought up by Blackstone include: blackstonegroupsucks.com, theblackstonegroupsucks.com, schwarzmansucks.com, stephenschwarzmansucks.com, stevenschwarzmansucks.com and steveschwarzmansucks.com. For those paying attention, Blackstone's "suck.com" strategy is similar to the one taken by Bank of America ( BAC) two years ago when the banking behemoth also found itself in the media crosshairs. At the time, BofA registered a slew of domain names to protect its CEO Brian Moynihan including: BrianMoynihanBlows.com, BrianMoynihanSucks.com, BrianTMoynihanBlows.com, and BrianTMoynihanSucks.com. Yep, if there is one thing you can always count on, it's that Wall Street firms have no problem stealing ideas from one another. Even the sucky ones.
1. Hildebrand's Swiss Miss
Swiss National Bank Chairman Philipp Hildebrand's wife pocketed 75,000 Swiss francs ($83,000) buying the safe-haven currency ahead of her husband's decision to stop it from rising. On Monday, Hildebrand resigned without admitting he knew about his wife's profitable and far-too-prescient trade. Aww. What a cute couple! She makes tons of illegal francs and he's obviously being less than frank. They clearly deserve each other. Just last week Hildebrand was resisting calls to step down, saying he only learned of his wife's big trade the day after she made it. That all changed Monday, when he told reporters that he could not provide evidence of his ignorance of his wife's purchase of 400,000 Swiss francs ($418,000) last August -- a scant three weeks before he intervened in the market -- and would be leaving his post. "The fact is: My word is my bond. I had no knowledge of my wife's transaction on that day," said Hildebrand. Sorry Phil. We're not talking about your hedge fund manager turned art seller wife going to the mall and buying a pricey new handbag without your permission. No, we're talking about an isolated half a million franc currency bet here. It seems to us this is the type of thing she might mention at the dinner table or maybe while you were in bed watching Seinfeld, don't you think? And if she didn't get the idea from her market-moving hubby during pillow talk, where else would she get it? At her art gallery? Sure, maybe when she wasn't buying Picassos and Pollocks, she was shorting the Japanese yen. That's a totally plausible excuse. Or perhaps not. "I failed my husband by not considering the perception of a 'conflict of interest' created by my purchase of dollars," she said. "My husband is a man of the utmost integrity, and I deeply regret that my actions might have led anyone to question this." How sweet of her to stand by her man. If only she didn't front run him first then he would still have a job. -- Written by Gregg Greenberg in New York.