Generic-Drug Stocks Still Under the Weather
The negative reviews ranged from criticizing the lack of short-term revenue opportunities to Goldman Sachs' complaint about Barr's ability "to drive value from Pliva," the Croatian company it acquired after a bidding war in 2006.
"Although we find very little to like about the Pliva acquisition, we believe that most of the integration risk has now passed," adds Cowen's recent research report. But Cowen also says Barr "is about to enter what could be an exceedingly strong new U.S. product cycle."
Cowen expects a revenue boost from Barr's generic version of the Bayer oral contraceptive Yasmin. Barr's drug could reach the market in June or July. Given the complexities of patent challenges and regulatory approval for generics, Cowen says Barr could be the only seller of generic Yasmin through 2010.
The firm also says Barr will benefit from being the first seller of a generic copy of Adderall XR, the attention deficit hyperactivity disorder drug from Shire (SHPGY). The U.S. launch is expected in April 2009.None of the analysts mentioned above own shares. Goldman Sachs has had a recent investment banking relationship with Barr. Merrill Lynch says it does, or seeks to do business, with companies mentioned in research reports. Barr's purchase of Pliva was matched by Mylan's bigger acquisition of the generic-drug business of the German drug and chemical conglomerate Merck KGaA. Along with another deal giving Mylan a majority stake in India's Matrix, Mylan has created the world's third-largest generic-drugmaker and some indigestion for investors. Mylan is now trying to sell Dey, a developer of drugs for respiratory ailments and allergies, which was part of the Merck deal. Mylan took a $385 million goodwill impairment charge for Dey, which contributed to a first-quarter operating loss of $371.5 million and a net loss of $443.9 million. During the quarter, Mylan said the various Merck businesses, especially those outside the U.S., produced, on average, lower profit margins than Mylan's U.S. subsidiaries. Analysts say future risks include integrating the Merck businesses and producing greater value from the acquired products. Mylan also cut its earnings projections not only for 2008 but also for 2009 and 2010. "The guidance for all three years is lower than what the investment community had expected," says a report by Credit Suisse, which has had a recent investment banking relationship. "The bar has now been reset lower, but we believe it will take a few good quarters for investors to regain confidence in the name," the firm adds. Credit Suisse is keeping its outperform rating, and the firm is one of nine sell-siders with buy ratings, says Thomson Reuters. Four firms have hold recommendations.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV