HedgeFundLIVE.com — I just finished reading the Duke Fuqua desk’s most recent trade report. In it, they detail their reasons for a long trade in Teva Pharmaceutical Industries (TEVA). I, too, like TEVA at these levels and agree with just about all of the Duke desk’s fundamental reasons to buy the stock.
TEVA is the undisputed heavyweight champion of generics makers in the world with a market cap closer to large cap pharma companies than to their generic brethren like Mylan (MYL) and Watson (WPI). Sure you can argue that TEVA generates a significant portion of sales from its branded drugs, especially Copaxone (see issue with MNTA), but the company’s bread and butter is still generics.
Healthcare costs are rocketing higher in the U.S. and it won’t be long before the Baby Boomers push our healthcare spend over 20% of GDP. Cuts to Medicare and medical device/pharma levy taxes aside, we’re going to need to focus more of our efforts on generic drugs; particularly in the biogenerics space. So much innovation in the therapeutics space comes at the hand of biotech companies these days, and their biologic drugs can cost anywhere from $10,000 to $150,000 per year.
The health reform bill aims to implement a path for biogeneric or biosimilar drugs that will continue to reward innovative biotech companies for their work, but that will also bring down drug costs. TEVA is at the forefront of biogeneric innovation and stands to benefit once final legislation is put into place.
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