Teva Pharmaceutical (TEVA)

(A Top Pick Dec 1/14. Up 12.46%.) MS Drug is their big branded drug, and people were worried about Copaxone and that a generic was going to take over. These guys were smart enough to switch to a new formulation, which has done wonders for their earnings. The knock on the company was that there was no growth, so they went out and acquired the generics business of Allergan. Also, made a few deals in Mexico. This company gives you a full suite of generic drugs.

The peers are rolling over so you have to be careful. The positive thing is that we have a long base since ’09 with higher highs and higher lows. He would be very careful with this sector.

There is a lot of M&A in the Pharma space. There are a lot of deals been done where you put two companies together and cut a whole lot of expenses. This sector has a tailwind and mergers and acquisitions will continue.

Generics Pharma manufacturer and they also have a drug of their own on which they just lost the patent. But they just changed the dosage on that drug so it should not affect them. They sell drugs around the globe. They are a potential takeover target. They have no defense against being taken over.

Have a branded drug for MS, and people were worried it was going off the patent cliff and get absolutely demolished. They have been able to turn it around and reformulate it, and move people to another formulation with a longer patent. The earnings, that people thought were going to go to 0, are actually going higher. Meanwhile it is the largest generic drug manufacturer globally, with a pittance valuation. Much more upside in the name. Yield of 2.24%.

Chart shows it in an upward trend, and is clearly outperforming the market. Trading above its 20 day moving average. Seasonally this one bottoms right around the end of July, and moves higher right through until the middle of September. If you own, hold on. Buy on any kind of weakness.

One of the big drugs they have is an MS drug that is just going off patent and makes up the big, big piece (60%?) of their total revenue. Like a lot of other drug companies, they are suffering for it.

(A Top Pick Feb 26/13. Up 21.52%.) Dividend has increased and they continue to buy back stock. The 10%-15% drop in the Cdn$ has worked out in his favour. Very cheap.

Have one big-name drug that accounts for above 50% of their profits. Their CEO abruptly left over the summer months. Generic space is very, very competitive. Good valuation and probably a good Buy but not something he is interested in looking at. Prefers Celgene (CELG-Q) or Johnson & Johnson (JNJ-N).

Everybody hates this but the more people that hate it, the more he loves it. The reason everybody hates it is that they have a blockbuster drug that is coming off patent next year and people are pricing it as though they are going to have profits of zero next year. In the meantime, they are generating lots of free cash flow. 3.2% dividend distribution.

You would think that this was an opportunity to own a business that makes total sense, a company that specializes in the generic drug space. However, the chart and the fact that the CEO is leaving means that they have not been able to materialize on their execution. There are other alternatives in generic drugs that have better risk profiles.

(Market Call Minute) It’s cheap and hopefully good things will happen. 8 times earnings and beautiful dividend.

As the major generic drug producer, it is going to do very well. The difficulty is that sometimes a generic introduction is delayed or the deal they get is not quite as good. If you believe that the longer-term outlook for pharmaceuticals is attractive, he would give it another year or so. It should start to display some signs of life.

Have new management and are targeting emerging markets, which is what they should be doing. They are on a severe cost-cutting mission. They are losing their multiple sclerosis franchise, which is why analysts don’t like it very much. You have to be careful here.

Frustrated with this stock. Just lost a very large patent case and it is going to cost them a lot of money. This is one of the biggest generic drug manufacturers on the planet with operations in well over 100 countries. Keep thinking it should do better. Trading at a very low PE multiple of around 8X. He’ll watch it for another quarter or two but by the end of 2013, if the market doesn’t like it any better, he may have to say goodbye.