Update Teva Pharmaceutical (TEVA)

Today (March 18) Teva Pharmaceutical Industries (TEVA) announced an agreement to buy Germany’s Ratiopharm for $5 billion in cash. Privately-owned Ratiopharm is Germany’s second largest maker of generic medicines—and the sixth largest generic drug company in the world. The deal, in which Israel-based Teva beat out Pfizer (PFE) and Actavis Group, will advance Teva from No. 5 to No. 2 in the German market for generic drugs. The German market is the second-largest market for generics in the world next to the United States.

Teva has a good record with acquisitions with actual cost-savings usually exceeding those projected at the time of the deal. Read more

Buy Teva Pharmaceutical (TEVA)

No matter exactly what health care reform bill (even no bill) emerges from Congress this year, the pressure to get costs out of the healthcare system is just going to get more intense. (For why see my October 13 post, http://jubakpicks.com/2009/10/13/losers-and-5-winners-from-health-care-reform-and-why-well-be-fighting-over-who-pays-for-a-decade/ )

In that effort requiring that health plans replace proprietary drugs with generics is an easy way to cut costs (or to look like you’re cutting costs).

So generic drug makers win once, because any legislation will expand the number of insured able to afford drugs, and twice, because economics will continue to move patients, doctors, and health care bill payers to generics.

No wonder that Teva Pharmaceutical Industries (TEVA) is guiding Wall Street to 30% earnings growth in 2010. Read more

Losers and 5 winners from health care “reform”–and why we’ll be fighting over who pays for a decade

We know what the health care reform legislation due today for a vote in the Senate Finance Committee will cost: $829 billion over ten years.

We know that it will extend coverage to 94% of all Americans, up from 83% now.

And, thanks to the blessings of the Congressional Budget Office we even know that it will pass that committee. And, startlingly for those of us who winced through the August town hall meetings that roasted members of Congress, we even know that something like the committee bill, or stronger, is going to pass Congress.

What you and I as investors now want to know is what stocks are going to make money from health care reform legislation. I think the best way to answer that question is to apply the economics of “externalities” that I explained in my October 6 post http://jubakpicks.com/2009/10/06/capitalism-could-still-get-a-stem-to-stern-overhaul-to-keep-score-in-the-revolution-track-something-economists-call-externalities/

Hope you didn’t think I’d spent all those words building a tool that I wasn’t going to use for stock picking.

The answers are surprising. Read more