Will Teva's Stock Heal in 2012?

The new year is here and that means that it's a perfect time to sit down with some of the stocks you own -- or, perhaps, are thinking about buying -- to figure out what 2012 may bring.

Today I'm going to take a look at Teva Pharmaceutical (Nasdaq: TEVA), the global generic-pharma giant that got knocked around by Mr. Market in 2011. Could 2012 be a better year for investors? Let's dig in.

The tale of the tape

Source: S&P Capital IQ. Company filings.

The keys for 2012
Investors will obviously want to keep an eye on all facets of Teva's business as it forges ahead, but I think there are three areas that deserve extra focus: the management transition, the off-patent opportunity, and growth outside of the U.S.

To kick off the new year, Teva announced that current CEO Shlomo Yanai will be retiring and Jeremy Levin -- former Bristol-Myer Squibb (NYSE: BMY) senior vice president of strategy, alliances, and transactions -- will be taking over. I have a bit of a bias when it comes to company leadership. My preference is to have a CEO that is a founder and owns a substantial piece of the business. Past that, I like seeing an internal hire that knows the company inside and out and has a sizable investment in the company.

Levin is none of those things. He's coming over from Bristol-Myers, where he served for just five years. Before that, he was with Novartis (NYSE: NVS), where he stuck around for just four years.

Of course, that doesn't necessarily mean that Teva's made a bad choice. On the bright side, Levin is extremely experienced, with more than 25 years in the pharma industry. He was the trigger man on Bristol-Myers' "string of pearls" acquisition strategy -- which will be a tough loss for Bristol-Myers. BusinessWeek quoted an industry analyst as calling Levin the "number one person in business development" for the industry. So with Teva hitting some ruts in 2011, a fresh face with a business-building track record could be just what the doctor ordered.

No matter who's running the show though, what remains clear is that there is a huge opportunity ahead of Teva as many blockbuster drugs are set to lose patent protection in the years ahead. In 2012 alone there will be significant action here. Novartis will lose Diovan, a hypertension drug that brought in a total of $6 billion in revenue in 2010. Merck (NYSE: MRK) will lose protection on Singulair, an asthma treatment and the company's largest-selling product, with 2010 sales nearing $5 billion. And Pfizer (NYSE: PFE) will see its first year exposed to generic Lipitor competition after the $10 billion drug lost its U.S. patent protection at the end of November. And those are just a few of many. In a recent presentation, Teva noted that through 2015, 66 major drugs with 2010 sales of more than $75 billion will go off patent.

Finally, investors will want to key in on the international growth opportunity for Teva. Though this is an Israel-based company, it's still heavily levered to the world's largest generics market, the U.S. And 2011 wasn't exactly a standout year for Teva in that market. While the company will have to turn that around, there is significant opportunity for it to grow elsewhere in the world.

Teva is already the top generics maker in many major markets around the world -- the U.K., the Netherlands, Italy, and Spain, to name a few -- but right now it sees a big opportunity in Japan, where there is a large pharmaceutical market, but very low generic-drug penetration. That won't fix struggles in the U.S., but it could be a good source of growth and a more geographically diverse business is rarely a bad thing.

The one number I love
On the basis of the stock's performance, it was a trying year to call myself a Teva shareholder in 2011. However, I think the opportunities ahead of the company, as well as the stock's current valuation, make this a stock well worth owning. That's why I'm keeping it in my personal portfolio and leaving it as an outperformer in my Motley Fool CAPS portfolio.

And while I don't like to see Teva's stock struggling, the fact the company pays a reasonable -- and fast-growing -- dividend makes it much easier to hold on through rough patches. Of course, Teva isn't the only great dividend payer you can buy. You can find a bunch of other high-quality dividends in The Motley Fool's special report: "Secure Your Future With 11 Rock-Solid Dividend Stocks."