Is generic-drug giant Teva Pharmaceutical
Turns out, it can afford to do both. Teva is showing that sometimes you can have your cake and eat it, too.
Last year Teva generated $2.2 billion in free cash flow, which helped the company pay down debt it incurred by purchasing Barr Pharmaceuticals, while still increasing its stash of cash and short-term investments by 18%.
Launches of 19 different generic drugs, including Teva's versions of Shire's Adderall XR and sanofi-aventis'
Sales of Teva's multiple sclerosis treatment Copaxone were up 25% last year, holding its own in a crowded market that includes Biogen Idec's Avonex, which rose only 5% last year. Investors should keep their eye on Copaxone's sales in the coming year as oral medications from Novartis
With all the cash, what's Teva going to buy next? Who knows. Teva is rumored to be in a bidding war for German generic-drug maker Ratiopharm, though its major opponent has apparently changed from Pfizer
If Teva loses out on Ratiopharm, another possibility is to expand the company's branded-drug selection, which has become a healthy contributor to the company's revenue with the growth of Copaxone and the addition of Barr's women's health products.
Whatever Teva decides to do, given management's track record, investors should be confident in letting management use the cash to reinvest in the business -- at least some of it.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Pfizer is an Inside Value pick. Novartis is a Global Gains recommendation. Motley Fool Options has recommended buying calls on Johnson & Johnson. The Fool has a disclosure policy.