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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.
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