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What: Medicis Pharmaceutical Corp.
So what: Teva had been working to introduce a generic form of Medicis' lead product, the acne drug Solodyn. Under the licensing agreement, Teva will market a generic version of Solodyn and pay royalties on those sales to Medicis.
Now what: Licensing royalties is an extremely high-margin business that requires little investment by the licensor (in this case, Medicis). The Teva deal also gives Medicis some protection against potential cannibalization by generics, which improves Medicis' outlook. With potential for EPS estimates to rise to reflect the Teva deal and a P/E ratio of only 11.3, the risk/reward on Medicis stock appears attractive.
Interested in more info on Medicis? Add it to your watchlist here.
Fool contributor Cindy Johnson owns shares of Medicis Pharmaceutical Corporation ... woo-hoo! We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.