Generic drug makers traded mixed Monday, as a Goldman Sachs analyst included Teva Pharmaceutical Industries Ltd. and Mylan Inc. in his list of "best buy ideas" and he predicted competition will grow in the industry.
In a note to clients, analyst Randall Stanicky said, "We see both Teva and Mylan (both CL-Buy rated) as well positioned competitively with valuations that remain reasonable." CL stands for conviction list, which is a list of the firm's preferred stocks in a certain sector.
He noted that shares of Israel-based Teva trade at 14.4 times his 2009 profit-per-share estimate, which he called attractive given the 15 percent to 16 percent growth in his model over the next two years. He holds a $50 price target on the stock.
Stanicky also expects the company's heartburn drug Protonix and antidepressant Effexor XR to perform well in 2008.
Last week, Stanicky upgraded Canonsburg, Pa.-based Mylan to "Buy" from "Neutral."
He said Mylan trades at 11.6 times his 2009 cash earnings estimate and thinks the company will be the fastest growing company in the generic drugmaking group he covers. He maintained a $19 price target on the stock.
Looking ahead, he said, "With the increasing scale and vertical integration that we are seeing emerge, we anticipate an increasingly competitive market place with the larger manufacturers remaining aggressive on retaining market share and others finding it increasingly difficult to compete on price."
Here is how some key generic drugmakers performed Monday:
Teva Pharmaceutical Industries Ltd., up 45 cents to $45.08
Mylan Inc., down 14 cents to $14.24
Barr Pharmaceuticals Inc., up 67 cents to $54.37
Watson Pharmaceuticals, down 60 cents, or 2.1 percent, to $28.71
Par Pharmaceutical Co., up 26 cents to $19.50
Caraco Pharma Labs, up 5 cents to $14.66
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