Exubera’s launch was somewhat disjointed. Originally scheduled for mid July of 2006, the official launch was changed to September of 2006.
Looking at the data (Graph Below – click on graph for a bigger picture) it appears that the fate of Exubera was sealed by about the official launch date, September of 2006. Weekly new script’s growth rate fell below about 15% and stayed there. By May of 2007, it was reported by Hambrecht analyst Andrew Foreman, that current users of Exhubera were 5,000. I would estimate that the patient retention rate was around 35%. A majority of patients tried Exubera and quit using it.
Based on forward p/e ratios the market is not overvalued. Yet, this is due to record margins and very low labor share. As a market historian said, profit margins are the most mean reverting historical data series we have. If they don’t revert, capitalism doesn’t work. Also valuation measures are not short term timing models. To wit: The irrational exuberance speech by Greenspan, Dec. 1996. If you look below you can see the models, at that time, were pointing to a fairly low expected future return, yet it took 6 years for markets to be reasonable again and it took over 10 years to be cheap again. I have spent a quite a bit of energy on this over many years. About all you can say, with a fair degree of confidence, is the total real return for stock prices over the next 7-10 years will be about -10%. Nobody knows how we get there.
One way to offset market risk is to look for stocks that have a chance at being isolated from markets. The pickens are getting pretty slim. Zero interest rates, in the end, mean low returns for everything.
Chart of Shiller p/e vs. future returns.
Or you can pick a model from Hussman’s charts
Jeremy Grantham (at GMO) who has been making 7 year forecasts for decades comes up with:
US Large: -1.1% to -1.6%
US Small: -4.5% to -5.1%
US High Quality: 2.7% to 2.1%
Intl Large: 1.5% to 1.0%
Intl Small: 0.7% to -0.1%
Emerging: 4.2% to 4.1%
Oriental Trading Company
Almost everybody gets the Oriental Trading company catalog. It is a catalog of party favors and trinkets. The company was founded in 1932 by Harry Watanbe in Omaha, NE. His son, Terrance, inherited the business in 1977 and continued to grow the company until he sold it for an undisclosed sum in 2000. After the sale, Terrance was expecting to devote his time and efforts to philanthropy. Within a few years he started gambling at Harrah’s casino in Council Bluffs. By 2005 Terrance was a high roller in Las Vegas. By 2007 he had managed to lose $204 million, in addition, he had borrowed another $14.7 million from the casinos and lost that also. It has been called the biggest losing streak in Las Vegas history. Court battles ensued and eventually Terrance was cleared of his gambling loans. After Terrance sold Oriental Trading Company it went on to file for bankruptcy. A buyout firm, KKR, brought the company out of bankruptcy in 2011 and recently it was sold for $500 million to Berkshire Hathaway. How ironic would it be if Warren Buffett hired Terrance to run the company again?