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May
18
ragupathyrenganathan
Generic Drug Stocks On Fire – Courtesy (Forbes)
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Generic drug stocks are on fire today on Wall Street in heavy volume. In early afternoon trade, Perrigo Company was up $35 (20.60%), Mylan MYL -1.26% up $9.23 (15.49%), and Teva Pharmaceutical Industries up $2.75 (4.25%).

The catalyst behind these big gains is a proposal by Mylan to acquire Perrigo at a hefty premium. Apparently, the market believes that the merger will create synergies and efficiencies that make the new company more valuable that the value of the two separate companies.

And there are good explanations for this belief. The generic drug industry stands to benefit from two trends.

First, an aging population is certainly expected to boost demand for pharmaceuticals. There’s a rapidly growing population of aging baby-boomers, which began around 2005, when the first baby boomer cohort crossed the age of 60. That ‘aging-in’ process is expected to last until 2024, when the last cohort crosses the age of 65. Worldwide, the over-60 portion of the population is expected to reach 30% by 2025, compared to 20% in 2000.

The second trend is the drive by healthcare providers to cut the rising costs of pharmaceuticals.

But winning in the generic drug space isn’t easy. Competition tends to undermine margins. That’s why generic makers are under constant pressure to expand the scale and scope of their operations, through new drug approvals and M&A.
Company Revenues Operating Margins+ Quarterly Earnings Growth (yoy)+ Quarterly Revenue Growth (yoy)+
Mylan N.V. 7.72B 20.04% 5.00% 15.20%
Perrigo Company 4.17B 18.63% – 9.50%
Actavis 13.06B* 8.35% – 46.00%
*$23 billion with the Allergan AGN NaN% acquisition

Source: finance.yahoo.com 3/14/2015



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