5 Health Care Companies Flying Below the Radar

Finding good investments isn't easy, but sometimes a stock screener can help steer you in the right direction.

In my eternal search for places to invest, I took the new CAPS screener for a test drive. I was looking for companies in the health-care sector with:

Here's a sampling of what I found:

Company

Market Cap (billions)

P/E

CAPS rating

Endo Pharmaceuticals (Nasdaq: ENDP  )

$2.9

14.3

*****

Pain Therapeutics

$0.4

35.4

****

Invitrogen (Nasdaq: IVGN  )

$3.9

23.5

****

Charles RiverLaboratories (NYSE: CRL  )

$4.5

26.6

*****

Hospira (NYSE: HSP  )

$6.0

25.8

****

Source: Motley Fool CAPS.

Specializing in pain
Two of the drugmakers on the list, Endo Pharmaceutics and Pain Therapeutics, are specialty pharmaceutical companies focusing on pain reduction, although they're in different phases of development. Endo has quite a few products, to the point where, like its big-pharma brethren, its patents are being challenged. On the other hand, Pain Therapeutics doesn't have any products -- yet.

How does Pain Therapeutics have positive earnings, then, you ask? It's struck a deal with King Pharmaceuticals (NYSE: KG  ) , and the collaboration payments more than pay for its costs. Pain Therapeutics may not have to wait much longer to start receiving revenue from sales, though; it and King recently submitted their first marketing application to the Food and Drug Administration.

Helping out drug development
The next two on the list aren't drug developers, but rather are in the support side of the industry. This lets you get the drugmaker-sized growth without the risk of drugs failing testing or approval.

Invitrogen is a provider of reagents for scientific researchers. It went on a buying spree a few years ago, adding products that didn't directly compete with its core molecular biology products. After recovering from its binge, Invitrogen seems to be back on the acquisition kick with its recent purchase of Applied Biosystems. I like the smart move Invitrogen made in not touching the brands after acquiring the products. Scientists are a fickle bunch, and by keeping the original names on the labels, researchers have confidence they're getting the same high-quality product.

Charles River Laboratories, on the other hand, helps drug developers later on in the drug-development process. The contract research organization (CRO) is an outsourcing company for preclinical and phase-one trials. As big pharma continues to cut costs, CROs step in and provide these services at a fraction of the price.

A generic spinout
Hospira was spun out by Abbott Labs (NYSE: ABT  ) in 2004; it sells generic injectable drugs and other hospital related products. While it's had trouble growing its bottom line recently, I like Hospira's prospects.

It's moved into the lucrative business of selling copycat biologics with its version of Johnson & Johnson's (NYSE: JNJ  ) Eprex. Hospira can't sell the product in the U.S. -- there's no pathway for the approval of follow-on biologics -- but selling it in Europe should give the company a head start once Congress and the FDA get their acts together. I also like the fact that the generic drug industry is consolidating. While I'd never recommend buying a company hoping it'll get bought out, as Barr Pharmaceuticals' (NYSE: BRL  ) investors can tell you, the surprise upside sure is nice.

Do your homework
These clearly aren't popular companies and you won't be able to find as much news about them in the financial press, which may mean you'll need to do a little more digging for information. But these hidden gems in a recession-resistant industry could be just what the doctor ordered.

The CAPS screener is not the only thing available at Motley Fool CAPS. Picks, ratings, pitches, and blogs all combine to make this one of the most vibrant investor communities out there as well as a great place to do research. Try it out -- signing up is free.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor pick. Barr Pharmaceuticals is a Stock Advisor recommendation. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


Read/Post Comments (0) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 695978, ~/Articles/ArticleHandler.aspx, 7/26/2014 1:46:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement