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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (55440)	6/11/2015 9:22:19 PM
From: Graham Osborn	2 Recommendations Recommended By E_K_S Mattyice Respond to of 78729

Hey EKS, Well, I have to admit 236% 4-year rev CAGR ain't bad. Maybe Biotech 2.0 really does work. Don't think I haven't seen it before. So this was basically a failing biotech that did a reverse split to avoid delisting.. funny how the story always starts like that, except this time neither Canada nor Ireland was involved so the shareholders didn't even get a tax benefit for their trouble. Then they started pursuing a "low risk development strategy" by acquiring approved or in-process ANDAs/ NDAs for everything from testosterone gel to Reglan. Strategy: (1) In-licensing/acquisitions/alliances for development stage ANDAs, revenue generating products (2) Enhancing generic product pipeline through development partnerships (3) Company acquisitions That's the magic of trading R&D for financial leverage. Compared with VRX they were more conservative though - rather than hike their leverage to 6-7 they did a nice mix of leveraging and dilution (D/E 0.8 currently, 4-year shs outstanding CAGR 42%). As I mentioned for TARO the key to the "growth pharma" is the ability to execute significant YoY price hikes on boring stagnant generic products - no volume growth necessary. The stock price shoots through the roof, providing fuel for subsequent acquisitions. FWIW last 4-year financials/ ratios: Insiders seem to understand the game as they've been dumping stock from every orifice (with the exception that they managed some nice opportunistic buys after the Shire deal blew up last year). I also like that the largest shareholder is an MD/ hedge fund manager with a portfolio chock-full of bubble buys - could be a bail risk if things get dicey. No, I don't see this one ending well for everyone.. it's too small to short though (VRX could buy it), hence I'll just have to watch from the sidelines. Some are braver though, which may explain the short float of near 20%. JMO, Graham