DOJ to block AT&T and Time Warner’s merger

Analysts cut Time Warner, AT&T targets following DOJ lawsuit

Time Warner Name to Become History, See Stockwinners.com Market Radar

Following the news that the U.S. Department of Justice is suing to block AT&T (T) and Time Warner’s (TWX) merger deal, several Wall Street analysts lowered their price targets for both names.
Nonetheless, Baird analyst William Power argued that he sees the merits of the antitrust case favoring AT&T.

DOJ LAWSUIT

Yesterday, the U.S. Department of Justice announced that it is suing to block the deal agreed to between AT&T and Time Warner.
Commenting on the news, AT&T’s Senior Executive VP and General Counsel David McAtee II said the DOJ lawsuit is “a radical and inexplicable departure from decades of antitrust precedent.”
He added: “Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market.
We see no legitimate reason for our merger to be treated differently. […] Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

PRICE CUTS

In light of the news that the DOJ will be suing to block the merger, Wells Fargo analyst Marci Ryvicker lowered her price target for Time Warner to $84 from $100 to reflect its standalone value.
Looking at Time Warner purely on fundamentals, the analyst told investors that she is not totally sure 2018 estimates are accurate given that the company has given no sense of trends for next year.
While #Ryvicker acknowledged that many investors have asked what Time Warner is worth, she does not think anyone steps in for it. The analyst reiterated a Market Perform rating on Time Warner’s shares.
Her peer at Barclays also cut his price target for Time Warner to $92 from $107.
Analyst Kannan #Venkateshwar argued that the DOJ move “in effect goes against almost 40 years of judicial commentary and action and, therefore, is quite unprecedented.”
Based on past DOJ frameworks, the analyst believes it may be tough for it to establish competitive harm, but the companies are likely in a 4-6 month period of litigation that should delay not only the closing of the deal but may also “chill other M&A activity across the space.”
Absent a deal, Venkateshwar estimates Time Warner could trade at $77 per share.
Meanwhile, Nomura Instinet analyst Jeffrey Kvaal lowered his price target for AT&T shares to $42 from $45 as he considers shares on fundamentals, while noting that he did not cut his target post the third quarter video miss given the pending deal.
Nonetheless, Kvaal told investors he believes the shares have “room to run” with or without Time Warner.

CASE MERITS FAVOR AT&T

Commenting on the lawsuit, Baird analyst William Power argued that the merger deal may be delayed, but is not dead.
The analyst argued that with Facebook (FB), Google (GOOG; GOOGL), Amazon (AMZN) and Netflix (NFLX) now media forces, including in original content, he finds it difficult to believe that AT&T will be able to significantly raise pricing for the Turner properties or HBO and risk driving away current partners.
Ultimately, Power believes the merits of the case favor AT&T. The analyst reiterated an Outperform rating and $42 price target on AT&T shares.

PRICE ACTION

In Tuesday’s trading, shares of Time Warner have gained over 1% to $88.79 while AT&T is fractionally down to $34.42 per share.


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Cytokinetics’ ALS drug fails

Cytokinetics Phase 3 clinical trial of tirasemtiv did not meet primary endpoint

Cytokinetics Phase 3 clinical trial of tirasemtiv did not meet primary endpoint. See Stockwinners.com for details

Cytokinetics (CYTK) announced that Ventilatory Investigation of Tirasemtiv and Assessment of Longitudinal Indices after Treatment for a Year in ALS, or VITALITY-ALS, the international Phase 3 clinical trial of tirasemtiv in patients with amyotrophic lateral sclerosis, or ALS, did not meet the primary endpoint of change from baseline in slow vital capacity, or SVC, which was evaluated at 24 weeks following randomization or any of the secondary endpoints in the trial which were evaluated at 48 weeks.

No new safety or tolerability findings related to tirasemtiv were identified in VITALITY-ALS. Serious adverse events were similar between patients who received tirasemtiv or placebo but more patients discontinued double-blind treatment on tirasemtiv than on placebo primarily due to non-serious adverse events related to tolerability.

The decline in SVC from baseline to 24 weeks was smaller in patients who received any dose of tirasemtiv in VITALITY-ALS compared to the decline in patients receiving placebo.

The largest differences from placebo were observed in patients randomized to the mid- and high-dose groups of tirasemtiv who could tolerate and remain on their target dose, although those differences were not statistically significant.

“While we are deeply disappointed by the results of VITALITY-ALS, we remain committed to people with ALS who are fighting this devastating disease and who need new therapies to slow the decline of respiratory function and muscle strength that are key hallmarks of disease progression,” said Robert Blum, Cytokinetics’ President and CEO.

“We have decided to suspend the development of tirasemtiv. While we believe that VITALITY-ALS demonstrated pharmacologic activity for the mechanism of action, we also believe that limitations of tirasemtiv may be addressed with our next-generation fast skeletal muscle activator, CK-2127107. Based on previous Phase 1 clinical studies, we believe CK-2127107 will be better tolerated and potentially more effective than tirasemtiv in patients with ALS and look forward to Phase 2 trial results in 2018. We are grateful to the trial investigators, site personnel, patients and caregivers who participated in VITALITY-ALS.”

CYTK closed at $11.10.


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CBS blocks Dish Network

CBS blacks out DISH subscribers, DISH offers OTA antennas at no cost 

CBS black outs DISH Network. See Stockwinners.com for details

DISH reported that CBS Corporation (CBS) chose to black out DISH customers’ access to 28 local channels in 18 markets across 26 states.

CBS is blocking consumers in an effort to raise carriage rates for local channels and gain negotiating leverage for unrelated cable channels, all with declining viewership on DISH.

“CBS is attempting to tax DISH customers on programming that’s losing viewers, tax DISH customers on programming available for free over the air, and tax DISH customers for content available directly from CBS,” said Warren Schlichting, DISH executive vice president of Marketing, Programming and Media Sales.

“Our customers are clear: they don’t want to pay a CBS tax. It’s regrettable and unnecessary that CBS is bringing its greed into the homes of millions of families this Thanksgiving.”

On a recent investor conference call, CBS boasted about the rate increases promised to shareholders, going from $250 million in 2012 to a forecasted $2.5 billion by 2020.

Those desired increases come as DISH customers are watching less CBS, with average viewership down 20 percent over the past 3 years.

As DISH works to reach an agreement, the company is offering digital over-the-air, or OTA, antennas at no cost so that customers in affected markets can watch CBS’s local broadcast channels for free.

Eligible DISH customers have the option to completely drop their local channels from their programming package, saving $10 on their monthly bill.

In recent weeks, thousands of eligible DISH customers in CBS markets have made the switch to OTA, accessing news, popular network shows and sports from CBS and other local channels for free, over the air.

Customers with qualifying equipment, programming, and location can choose to receive local channels free over the air and save $10 per month on their bill. At no cost, DISH will install an antenna for qualifying customers in CBS markets based on the reception available at their home.

In addition to asking for significant price increases for local channels, CBS is attempting to “force bundle” unrelated and low-performing cable channels at a premium.

“CBS is using its mix of local and national channels against viewers, abusing outdated laws to try to force consumers to pay more. This greedy attempt to extort more money from our customers is one of the main reasons we – and our industry – are asking Congress to restore balance in the broadcaster-pay TV equation,” said Jeff Blum, DISH senior vice president and deputy general counsel.

“We are asking lawmakers to reform outdated TV laws to give our customers the best viewing experience at an affordable price – without the threat of broadcaster blackouts.”

Along with other pay-TV companies and public interest groups that form the American Television Alliance, DISH has called for the U.S. Congress to revamp the out-of-date laws that favor these high fees and unnecessary blackouts.

Blum continued: “We continue to urge the FCC and Congress to update a system that emboldens broadcasters to black out consumers.”


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