Novo-Nordisk (NVO)

On valuation, it is really not that exciting. Not cheap nor expensive. The key moving part that creates concern is long-acting insulin pricing in the US. Up until 18-24 months ago, they and Santa Fe (?) were in kind of a cooperative duopoly and inflating prices and did about a 20% gain in one year. The insurers finally had enough, and instead of covering both drugs, they would throw it off to whoever gave the lowest bid. It is not clear where this is going to really end. Until this is decided, there is just no reason to catch a falling knife.

Leader in diabetes in the space. They have fat margins. There is a growth potential in emerging markets where diabetes is growing faster.

(A Top Pick June 7/16. Down 16 point to 3%.) Got hurt recently, because their sales dropped by .05% and analysts are only looking at the short end. The company has 3 potential blockbuster drugs coming out on the diabetes sector, which should give them long-term growth over a ten-year period.

As far as a pharmaceutical company goes, this is pretty expensive, trading at about 24X earnings. Has about a 50% share in the insulin market, and diabetes is a disease that is growing quite rapidly. Thinks they will continue to do well. Has a very low yield of 1.7%. You would want to buy this on a pullback.

They do drugs for human growth hormone and hemophiliac medicine, but insulin is still their big baby. Over the next 20 years, the number of type II diabetes is expected to grow by 50%, mostly in India and China. The company has new drugs coming out which is helping diabetics to lose weight. Have done a joint venture with a company that will allow them to do oral instead of injections. Dividend yield of 1.67%.

They got approval for 3 drugs, all to do with diabetes. The demographics are in their favour. The company has always traded at an expensive multiple. The stock has done exceptionally well. It is the one Pharma name he owns. 35% compound annual rate of return.

(Top Pick Jan 16/15, Up 24.78%) Diabetes is a growing industry. This is the largest and there are economies of scale. He feels it is still in the early stages.

(A Top Pick Jan 16/15. Up 25.44%.) Has the largest market share when it comes to diabetes drugs. Diabetes is a fast-growing illness and it is reported that by 2030 there will be twice the number of people globally that have diabetes. A great way to play emerging markets.

(Top Pick Jan 16/15, Up 29.33%) Great returns. Tough to complain about. The largest market share in the diabetes space. Emerging market countries are contracting diabetes at the highest rate but you can’t sell the drugs at the same price and they can go in and cut their prices. He still likes it long term, but it went up in a flat market.

(A Top Pick Jan 16/15. Up 32%.) This is a name he is still Buying. This has the largest market share in the diabetes drug space. Because they are the largest, there are economies of scale. With economies of scale comes a fatter profit margin. Their profit margin is 20%, compared to their competitors at 11%. The part of the world that is growing most rapidly in terms of new diabetes cases is the emerging markets and Latin America, which can’t afford to pay the same amount for diabetes drugs as we can in North America. This company is able to go in and offer the drugs at a much lower price and really take over the market. Still early days. Dividend yield of 1.25%.

Largest developer/manufacturer of synthetic insulins globally. Has been a great way of participating in the global diabetes pandemic. Has done well this year because there is heightened expectation that the US is going to approve a long lasting insulin Tresaba. If this gets launched in the US, growth could be in the low teens again next year. This is a hold.

This company has done a phenomenal job. Very focused on diabetes which is a long-term growth area. The problem is, the stock is trading for a mid-$30 multiples, and there isn’t much of a dividend there. He would look at this as a wait for a selling opportunity.

Has a very strong franchise in diabetes. Stock has done incredibly well. Also, have the potential of an obesity drug coming out. A lot of that is in the stock already. The problem he has is that the stock trades 54% above its peer group, has done 22% better than the healthcare group, trades at 33X earnings and doesn’t pay very much of a yield. Wait for a pullback.

(A Top Pick Jan 16/15. Up 8.17%.) The largest in the diabetes space. The opportunity is that because they are large, they have significant economies of scale. That is important, because their profit margin is close to double of their competitors. Areas that are growing fastest in terms of new diabetes cases are emerging market countries, which are often the ones that cannot afford to pay the same amount as we can in North America, so with a profit margin that is double their competitors, they can go into that market, provide the drugs at a lower cost, start to own the market and still make very good money.

A Danish stock. Largest manufacturer of insulin globally. Modern insulin, being a biologic drug as opposed to chemical drugs, are very, very difficult to duplicate, so there is not really a patent expiry cliff. There is tremendous visibility on the growth of this stock, at 8%-10% this year and similarly in the coming years. Was up today on an announcement of ethnicity on one of their key drugs that was in trial. Dollar cost averaging into this one night be something you want to think about.