Novartis, lily in a strings of multibillion dar deals. We call it pharma palooza. What does it mean for you . This, folks, is power lunch. This, sue, is your power lunch on drugs. Indeed it is, certainly today. We have it all covered with a fantastic team. Pershing squares big ackman and valiants ceo presenting their idea before investors and the media in new york a bit earlier. Kate kellie has the takeaway. High, kate. Were well into hour number two of this Investor Presentation when we heard from both. Big ackman taking the stage for the second time since ive been here just as i walked out. Hell be taking q a in just a few minutes. A quick reminder on what this deal entails. Its essentially a proposes cash and Stock Transaction in which every share of allergan would be received for cash as well as a large majority of a valeant shares, a lot of talk from Michael Pearson today whos been successful in dlirg shareholder returns about the durability of his assets, the products, the fact theres less of a patent cliff that this there is for many other similar companies. The emphasis on sales as opposed to more traditional areas like r d. Then we heard from big ackman. He made interesting points about why he stayed away from pharmaceuticals in the past, but why this deal was attractive to him. Lets take a quick listen. In pharmaceuticals before. Why is that . Because the typical pharmaceutical business, you have products constantly coming off patent, investing huge amounts of money on speculative r d. Price pressure, but then i learned about valeant. What we like is it fits our paradigm. A business with durable products and brands. The persistent cash flow we look for. Reporter so a lot of attractive points for bill ackman. Hes betting very big on this. 30 tied up in the combination of his investment in valeant, and also in all elergaallergan. And we know youll keep covering it for us all day long. Lets look at this and all the deals. Meg tirrell, thanks for being with us. Why do they have it . Two billion product botox. Half of its sales come from therapeutic uses, in migraines, testing it for things like depression and pain. It fits right squarely in with what valeant looks for in what they call durable products. Products that dont have patent cliffs. Think of the Christmas Gifts he would give to people with botox if he owns it. Bottom line me here. Is this deal going to get done . Thats the question. This is a big deal for valeant. A lot of people are saying potentially in for a long haul. Valeant has been traditionally a very disciplined buyer. White knight came in, testifia bid a billion more, they backed off. Theyve made it clear they dont chase for the sake of chasing. Also involve eli lilly, glaxosmithkline in sort of an asset wall with novartis. What are they doing and why . You called it pharma pa leases that, and thats such a great name. Bulking up where these companies are strongest. Grab obrought novartis vaccine business. Both of those Companies Getting stronger with these purchases. Eli lilly bucking the number two health xeer with the purchase of novartis unit. Why is all of this dealmaking in pharmaceuticals happen now . They all have a lot of money to spend, but they have gone through the patent cliffs, and a few years ago they were all getting better, all becoming conglomerates. Now a few years later maybe theyre figuring out maybe theyll specialize in the areas they are best in. Slimming down where they dont want to be and bulking up where they do. Meg, thank you very much. Sue, down to you. Back in 201, valeant planted a foreign flag as a way to skip paying taxes. So what are the chances that congress will clamp down on this socalled tax arbitrage . Eamon javers has been dugging for some answers. It seems like this is Something Congress would embrace, but is there appetite on the hill for it . Thats the big question. When you look at a company like valeant, you have to keep an eye on political risk, the risk theyll change tax policy to prevent what valeant did in 2010, when they acquired a Canadian Company and did a tax inversion and moving the head qua respect to canada. Theyve long are targeted by congress. Ive covered efforts to clamp down on them since 2001. But it was affected arier this year when the Obama Administration included an antiinversion measure within the budget proposal. Ive been talking to folks on capitol hill today, experts in this. They say theres no real clarity here on what the hill will actually do what it comes to these kind of tax inversions. Theres a way to do a reform on inversions that doesnt Impact Companies that have already inverted. Theres a lot of wiggle room and no real likelihood politically that anything is coming anytime soon, tyler. But eamon, valeant is an interesting situation. We have a lot of Pharmaceutical Company that is do have stakes in other countries. Thats different from what valeant did, correct . Thats right. When you look at the complexity, theres one move in tax law thats referred to lovingingly as the double irish. Another one is called the dutch sandwich. Theres a lot of moves that company cuss do that get a lot of criticism on capitol hill, but are legal within the tax system. Its just that they have to really go through convoluted twists and turns to make them happen. But they save money. But theres a lot of headline risk potentially. Thanks, eamon. Ty, up to you. Big picture on biotech. Some of the biggest players driving performance in that industry, the ibbetf, and we have the drilldown on this popular fund. Its very, very big in terms of the numbers of stocks that make up the etf, but the Top Five Holdings is about half of the exposure. So it bays to look into it. This is a stock thats up about 3. 5 year to date, but its gone through some crazy ups and downs. The top five stocks, if you look rat whats happening with this particular etf, amgen, celgene, bioguinn, id kreismt, gilead, thats the weighting, but not necessarily by market value. Gilead is only the fourth most watted stock in this particular etf. If you look at they stocks, it is massive and the big part of the etf. If you look at a few in particular that make up the top ten, well broaden the scope, a stock like Gilead Sciences is still down about 12. 5 , and still off 25 or 2 away from the 52week high, a stock thats been on sale because of the recent sell offin biotechs. Does that mean it becomes a possibility attractive buying opportunities for some investorses . Maybe, maybe not. Illumina, its down about 26 from its 52week high. Another big sale for investors if they want to get into some big names. Of course another one as well. This company here is down about 24 year to date and lost about 26 of its value since weve seen its 52week. When investors look at this name, they say we can look at the etf or some names that make up part of it. You wonder whether or not, sue, that these selloffs create buying opportunities for people or company that is want to buy up our invest. Back over to you. I think youre absolutely right. Dom. We havent even really scratched the surface of whats happening. Drug giants novartis and dplax osmith klein struck a 20 billion dial to trade their assets. Gsk gets the majority of novartis vaccine business. Big plays that could ultimately reshape the entire industry. Barbara ryan has ways to profit from some of those changes. Nice to see you again nice to see you, too. Mr. Ackman teaming up with valeant kind of changes the deal landscape. Is this an indication that the m av a may change . We have seen a trend of active investors being more broadly involved in longterm transactions and strategic investments. Certainly this, you know, is a compelling and striking example of that. I think the other is last year we saw 77 billion in m a transactions in life sciences. The average deal size was up 49 . Were clearly going to blow through those numbers against this year. So talk to me about the consolidatation thats going on in the industry. You know, it seems to me that its all about scale. Yes. And the fact that they all have patents that are going to expire. So if they have to deal with that and dont have a great pipeline, they can buy the pipeline, correct . Absolutely. I think youre absolutely right. Its about scale, about being a dominant Global Leader by market share. Its about maximizing efficiency. This industry is growing locally globally around the world, so these synergies are required to drive accelerated earnings growth. Were seeing that play out. We also have rumors that pfizer was going to step in and buy astrazeneca. I think there is a glaring point to be made here about our tax policy in this country. When you see the flood of money that is leaving because we are not competitive from a tax perspective, and certainly companies are looking to get while the getting is good to eamons earlier comments about the potential for these loopholes to be changed. What companies do you think still have to do deals . I think there are a bunch of companies that are likely to continue to do significant deals. Para go last year acquired elan. They are certainly armed to do much more substantial transactions. Another company were mylan. A lot of these are taking place in the special markets, where valeant competes. All of those companies you mentioned are being bought today, probably in david faber will join us later, lives at the active passive summit with Barry Rosenstein. Thats coming up in the next half hour of a very busy and big power lunch. Thank you, sue. Another massive day for earnings. About 70 points away from a record high at 16,554, the s p up 11 points at 1883. 43 points higher no the nasdaq. Well here about best bets from market veterans at usaa and atlantic trust, when power lunch returns after this. Plus the legal battle between aereo and the nations most powerful networks has gone to the Supreme Court, in a case that could change the way you watch tv. Thats next on power lunch. [ banker ] sydney needed some Financial Guidance so she could take her dream to the next level. So we talked about her options. Her valuable assets were staying. And selling her car wouldnt fly. We helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today. And tomorrow. So lets see what we can do about that. Remodel. Motorcycle. [ female announcer ] some questions take more than a bank. They take a banker. Make a my financial priorities appointment today. Because when people talk, great things happen. [ dog barks ] [ male announcer ] imagine the cars we drive. Being able to see so clearly. To respond so intelligently and so quickly, they can help protect us from a world of unseen danger. Its the stuff of science fiction. Minus the fiction. And it is mercedesbenz. Today. See your authorized dealer for exceptional offers through mercedesbenz financial services. Complicated case today that could impact the way you watch tv. At issue, a Company Called aereo that captures programs using antennas and then streams them to you the online subscriber. Our Hampton Pearson is in d. C. With the key takeaways. The Supreme Court justices were basically conflicted and skeptical about that area of technology which carry i dont claims is for the benefit of the consumer in terms of being ability to stream free over the air broadcasts reported for later playback, if you will. The justices skeptical in the sense of saying at one point Justice Roberts among others, how are we to be convinced that all of your technology is simply designed to get around the copyright laws, which was at the heart of the case, and the chal ink made by the major networks. Aereo kept come coming back that theyre enabling the consumer. On the flip side, the chief lawyer for the broadcasters arguing, wait a minute, no, this is theyre doing something other folks, including cable and satellite folks dont get to do. Thats take the content, put it out there, and not pay some sort of royalty or licensing feel, if you will. The other piece, as far as the argument from aereo was the court should be careful in this case, not just keep it focused on the Aereo Technology, but worry about the possible impact of any ruling on Cloud Computing in the future. The justices, even the lawyers for the broadcasters said just deal with the Aereo Technology question and leave the nothing of Cloud Computing for another legal day. All in all, interesting. The gloves did come out, the broadcasters saying if aereo goes out of business, nobody should shed a tear. Tyler . Hampton piercing out front of of the Supreme Court. Whats the likely outcome . Always great to see you. You liken this case to prior Supreme Court decisions involving the sony bet amax ability to record things, and also dvr technology. On the face of it, it doesnt seem like it has anything to do with those. No, on the face of it, it really does. I dont mean to be rude, but all aereo is doing is teak over the air signals, putting them in the cloud and provides a technology that allows individual consumers to draw that content down when and if they want it. It is really not as the lawyers for big media against aereo have claimed in court today. Its not really the technology at all, because there will be more and more innovations in Technology Like aereos and others that will continue the march towards over the Top Television away from cable and away from over the air direct live broadcasting, no matter what. Its really a question of public or private. Aereos position is that they are providing private content, just as the sony beta max case was decided on, public versus private. So it was the cable vision dvrs case. Barry diller i gather is a big player, and boy did he make his bone at absence and fox. He sure did. But answer me two quick questions. Number one, can i watch the content in live . If i want to watch the nfl on fox, can i watch it via aereo as its happening . If its on fox, its not exactly live. There is a few seconds delay while technology is sending that signal to the cloud, and then the individual viewer can draw it down from the cloud using the antenna that aereo provides, but most of the live sports are going to be on cable only because of the dollars involved. Eventually. Well get to that. The idea that aereo is going to destroy television as it exists today is really not very convincing, because aereos even if they win, which i think they will at the Supreme Court level, theres still a tiny fraction of the total audience. Netflix has nearly 40 million subscribers. If aereo wins, who loses . Do the networks lose . The stations operators . The networks are never going to lose, because they control the content and can do what they want with that content. The people who may lose are the independent local television stations and the small independent groups. Sinclair, tribune broadcasting. They exist primarily on the retrans fees they get right now. If you can watch your local news and weather on aereo, you will not buy cable, and cable will not pay these guys. Porter, thank you very much. Well rely on you to explain it for us. All right. It will be an interesting challenge. Its really the cause of all of this is the flawed copyright law that is congress has passed the last 40 years. They have to be readjusted refocused for new technology. Themes, thank you, porter. Sue, down to you. We have a big market day on our hands. A tripledigit rally. The s p is up almost 12, and the nasdaq composite on track for the sixth straight day of gains. Keep in mind the last 14 tuesdays in a row have been very positive for the market. In addition to that, the transportation average is sharply higher. And were in earnings season, how are earnings contributing to the move. Thanks, gentlemen, for joining me today. I appreciate it very much. Dave, im going to start with you. We are in earnings season. So far so good, though we should note that a lot of these companies had ratcheted down expectations of earnings before we started the season. How do you feel about the market at this juncture . Reasonably positive. We came into the year with reduced expectations, after a huge 2013. I think thats a high singledigit year, is what we expect for the s p 500. Earnings, as you said, have come in okay in the first quarter, but only because they were expected to be on the weak side. The good news is we do think earnings in the second, third and fourth quarters will pick up and be positive comparisons, mostly because we think were on the cusp of better economic activity. How are you allocating cash for your different members. I know youre cautiously optimistics, but you favor more european, more developed markets and the United States. Yeah, we do, sue. You know, to daves point we are cautiously optimistic on u. S. Equities as well, but were mindful of the valuations. When you just talked about it, when you ratchet down earnings and the expectations of earnings, yet the mark continues to go higher, the valuations just are going to get stretched and stretched. From a relative value perspective to us, theres more opportunity outside of the u. S. , in europe in particular, given their increasing margins and improving economy. Then the valuations are very effective on the em space as well, as long and were sticking with a more defensive side, focusing more on sectors that are not as expensive, we think theres money to be made within the u. S. Market as well. However on a relative value basis, outside the u. S. Theres more attractiveness. Dave, tell me what you make of what the bond market is telling us versus what the stock market is telling us. Is the economy Strong Enough to justify the levels we are seeing in stocks . Yetted bond market seems to be telling us the bond is not. Maybe thats distorted by the fed, but what do you think . I think they are somewhat distorted by the fed, but its a good point. If you look at the levels, say, on the tenyear treasury, it is forecasting mediocre Economic Growth well into the future. We think that