Generic drug maker and Motley Fool Stock Advisor recommendation Barr Pharmaceuticals (NYSE:BRL) will report Q4 2006 financial results on Wednesday, Feb. 28.
What analysts say:
- Buy, sell, or waffle? Of the 15 analysts that cover Barr, 11 say buy, while four hold the generic opinion that you should hold.
- Revenues. Revenues are expected to come in at $521.3 million, a 62% increase over the year-ago period.
- Earnings. Per-share profits are expected to drop to $0.73 from the $0.88 per share recorded last year.
What management says:
This quarter is being billed as the fourth-quarter report for Barr, but that's because it's changing its fiscal year. For comparison purposes, this is really the second quarter. Look for how the recent acquisition of Pliva affects the company. Barr got into a bidding war for the Croatian generic drug manufacturer, ultimately paying about $2.5 billion, becoming the third-largest generics pharma in the process. This lets Barr enter the biogenerics market -- a spot where it's never had a presence, which can present problems. Biogenerics is an umbrella term for generic biologic drugs developed through genetic manipulation. The FDA is only just getting around to defining the industry, although it has seen much larger acceptance in Europe.
Barr has also been acquisitive in other areas, too, and last year's results include the recapture of a $63 million charge that resulted from Barr's acquisition of Mircette and ending a legal battle with them. As a generic drug company that challenges the patents of the pharmaceutical industry, lawsuits are an ongoing cost of its business.
What management does:
Barr needs to make the acquisitions it does to keep the pipeline bubbling with new products. Last quarter saw the loss of the six-month window of exclusivity for one of its drugs, and revenues only rose 7% as a result. The first to market with a generic gets the chance to have a honeymoon period with its drug before competition can move in. It's similar to its own little patent protection. It does have proprietary products, and they've been performing very well and should continue to do so. This is good, because the proprietary products have higher margins than the other generics Barr produces.
|
09/05 |
12/05 |
03/06 |
06/06 |
09/06 | |
|---|---|---|---|---|---|
|
Gross |
71.8% |
73.3% |
74.3% |
75.4% |
75.7% |
|
Operating |
32.4% |
35.9% |
36.9% |
43.4% |
42.1% |
|
Net |
22.1% |
23.8% |
23.8% |
25.6% |
22.9% |
One Fool says:
The generics industry is on the move as the profits to be realized from getting lower cost drugs to market has increased. With more than 1 billion prescriptions filled with generics -- which can cost 30% to 80% less than the brand-name drug -- generics account for $0.13 of every $1 spent on medicines in the U.S. Congress is looking for ways to make good on its promises to lower the cost of health care, and juicing the generics industry is a no-brainer that doesn't carry with it the political fallout of allowing foreign-made drugs into the country.
Barr's valuation isn't the cheapest in the industry, but it's not the most expensive, either, and sitting about 20% below its 52-week highs makes its current price not unattractive.
Competitors:
- Mylan Labs (NYSE:MYL)
- Watson Pharmaceuticals (NYSE:WPI)
- Cephalon (NASDAQ:CEPH)
- King Pharmaceuticals (NYSE:KG)
- Par Pharmaceuticals (NYSE:PRX)
- Teva Pharmaceuticals (NASDAQ:TEVA)
Related Foolishness:
Barr Pharmaceuticals has earned a five-star rating from Motley Fool CAPS, the new investor intelligence community. You can add your voice to the new stock rating service by joining today. It's free!
Barr was recommended by Tom Gardner to Stock Advisor subscribers. A generic 30-day risk-free trial subscription lets you see why the industry should be good for your portfolio.
Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
