3 Little-Known Pharmaceutical Companies to Put on Your Radar

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Over the past year, the best-performing drugmaker stocks all have had one thing in common: They received very little attention before providing patient investors windfall gains. Being considered insignificant in itself isn't a great reason to scoop up shares of Teligent (NASDAQ: TLGT) , Synergy Pharmaceuticals (NASDAQ: SGYP) , or Portola Pharmaceuticals(NASDAQ: PTLA) , but these three Motley Fool contributors wanted to share some reasons these underappreciated companies belong on your radar.

Brian Feroldi (Teligent) : Being called a "specialty generic" drug manufacturer might sound oxymoronic, but Teligent has stumbled on a clever business strategy that could make it a great stock to put on your watch list.

1. Teligent: A winning strategy

Unlike most generic-drug manufacturers, Teligent focuses exclusively on selling products from the topical, injectable, complex, and ophthalmic markets. The company's products include a number of lotions, creams, and ointments. Each year a number of brand-name drugs from these categories lose patent protection, allowing Teligent to swoop in, make a generic, and send it off for regulatory approval. Once it gets the green light from regulators, it sells its product at a discount, allowing it to steal market share.

The company has been running this simple playbook for a number of years with great success. Here's what happened to this company's revenue and stock price over the past five years.

TLGT Revenue (TTM) data by YCharts

The company's revenue has been on a tear, and it shows no sign of slowing down. Last year, Teligent won FDA approval for nine new products. That's a big number when compared with the 11 products it had in its entire portfolio at the end of 2015. As those products hit pharmacy shelves, Teligent's top line should continue to surge. That makes this drugmaker a great stock for growth-focused investors to get to know.

2. Synergy Pharmaceuticals: Great momentum

Keith Speights (Synergy Pharmaceuticals) : Synergy Pharmaceuticals is on a roll. The stock is up nearly 65% in the past six months. Synergy's experimental gastrointestinal drug, plecanatide, is behind the tremendous momentum.

In December, Synergy announced results from two late-stage clinical studies for plecanatide. Both studies evaluated the drug in treating irritable bowel syndrome with constipation (IBS-C). Synergy expects to submit for regulatory approval in the first quarter of 2017.

The U.S. Food and Drug Administration is currently reviewing Synergy's new drug application for plecanatide in treating chronic idiopathic constipation (CIC). The agency is expected to make its decision by Jan. 29.

While anything can happen with the regulatory process, I think Synergy's chances of approval look pretty good. If approved, plecanatide should have a sizable market -- around 14% of people in North America suffer from CIC. Around 4% to 5% of American adults have IBS-C.

3. Portola Pharmaceuticals: Two paths to profitability

Cory Renauer  (Portola Pharmaceuticals) : Portola Pharmaceuticals stock recently rocketed up after the FDA agreed to an expedited review of an application for what could become its first commercial-stage drug. Betrixaban is an oral factor Xa inhibitor of the sort that is quickly replacing age-old warfarin as the blood thinner of choice.
Image source: Getty Images.

Last year, betrixaban produced some mixed data in a head-to-head study with an older, injectable drug of the same class, but it still has a solid shot at earning approval to prevent dangerous blood clots in patients who have been hospitalized for serious medical conditions. While an approval for betrixaban this year would send Portola Pharmaceuticals stock climbing, a different drug candidate could be another serious value-driver.

In biopharma circles, Portola's main claim to fame is an antidote to drugs such as betrixaban and Eliquis from partners Bristol-Myers Squibb and Pfizer . Factor Xa inhibitors can cause uncontrolled bleeding events, and Portola's AndexXa could become the first fast-acting agent available to reverse its effects.

Last year, the FDA asked Portola for more information regarding AndexXa's use in a less common factor Xa inhibitor, and to clear up some manufacturing facility concerns. The setback was disappointing, but its chances of approval the second time around seem solid. In fact, Bristol-Myers and Pfizer feel good enough about its prospects that they offered Portola a $50 million unsecured loan to further its development.

With two drugs approaching the finish line, this is one little pharmaceutical company you should be hearing a lot more about.

By Cory Renauer, Keith Speights, and Brian Feroldi, 

source: http://www.nasdaq.com/article/3-little-known-pharmaceutical-companies-to-put-on-your-radar-cm732433

My Top 3 Fabulous Pharma Stocks

Summary

• Powerful demographic forces support growth in Pharma.
• This article covers three strong growth candidates expected to benefit.
• Valuation is important, and future earnings growth supports each candidate.

Introduction

I am a fervent believer that investment decisions should be made based on the relative merits of each individual investment under consideration. However, my anecdotal observations and experience suggests that many investors do not embrace that approach. This is especially true regarding investment decisions on common stocks. Instead of focusing on the opportunities and valuations available from select individual businesses, many investors are obsessed, and I allege blinded by generalized views or beliefs about the overall market and/or the economy.

For example, in a recent article found here, I postulated about reasons why carefully selected growth stocks might benefit retired investors under certain circumstances. In the article, I presented a few examples of high-quality fast-growing businesses that I considered fairly valued based on their earnings growth rates. Unfortunately, and as I expected might happen, a comment made in the article rejected my carefully selected growth stock research candidates based on what I believe are misguided views about the market in general. The comment is included in its entirety as follows:

"I like growth stocks but not when the market is at all-time highs and way overpriced as it is now. Just for example, the Russell 2000 is at a P/E of 40 and P/B of 4 - hardly compelling valuations.

Many growth stocks should be sold short here and that is what I am doing. When the market tanks (soon) I will close out my shorts and go long on some of the growth stocks I like.

Making a decision on buying a stock without looking at its relative valuation and that of the market is a dangerous proposition and one I am not interested in."

To clarify my position, I offer the following elaboration and critique regarding why I found this comment concerning. First of all, the reference that the P/E ratio and price-to-book ratio of the Russell 2000 were at all-time high valuations was not relevant to the valuations of the individual research candidates I presented. Each of the companies I presented was offered because I believed their valuations were in alignment with their past, present, and most importantly, their future earnings potential. The valuation of the Russell 2000 was therefore irrelevant.

The second paragraph also offered a generalized view of growth stocks and suggested that they should be sold short. But again, I don't believe this statement relates specifically to the candidates I offered in the article. Then the bold prediction was made that the market would tank soon, which of course, is impossible to accurately forecast. However, the comment also indicated that this could be timed to perfection by closing out shorts and then investing in growth stocks that were favored. Again, I contend that this is impossible to time or predict.

Finally, the comment suggested that buying a stock without looking at its relative valuation and that of the market was a dangerous proposition. Of course, I vigorously agree that investors should evaluate the valuation of the company, but only based on its specific fundamental merits, regardless of the valuation of the overall market. I elaborated on my belief that it's a market of stocks and not a stock market in a recent article found here.

The Pharma Sector - Powerful Demographic Forces Support Growth Potential

Therefore, I was motivated to offer this follow-up article on growth stocks for retirement portfolios by offering three attractive looking growth stock research candidates in the Pharma sector. Thanks to the demographic forces of an aging population, I contend that the Pharma sector offers enormous growth potential that is independent of the general economy or the stock market.

As I indicated in my previous article on the appropriateness of growth stocks in retirement portfolios, they are not necessarily a good fit for every retired investor. However, for those investors at or near retirement that are interested in adding some growth, I offer the following three Pharma growth stock opportunities that I am personally researching. Most importantly, my initial review indicates that each of these candidates are reasonably valued based on their respective future growth opportunities.

Three Fabulous Pharma Growth Stocks

Two of the following three Pharma growth stocks were originally previewed in my previous article. In this article, I have added a third Pharma research candidate in what follows is my reasoning as to why I consider these attractive growth opportunities based on my preliminary research. Perhaps readers of this article that have more information or familiarity with any of these companies will help the rest of us by sharing their knowledge.

To get a free more detailed perspective on these three Pharma stocks, follow this direct link to a video on my site mistervaluation.com and watch and listen to me analyze these companies out loud via the FAST Graphs fundamentals analyzer software tool.

Actavis plc (NYSE:ACT)

Actavis, my first research candidate, is well positioned to serve the growing pharmaceutical needs of our aging population. The company offers both branded and generic pharmaceuticals worldwide.

Short business description courtesy of S&P Capital IQ:

"Actavis plc, a specialty pharmaceutical company, develops, manufactures, markets, and distributes generic, branded generic, branded, biosimilar, and over-the-counter (OTC) pharmaceutical products. It operates in three segments: North American Brands, North American Generics and International, and Anda Distribution.

The North American Brands segment provides patented and off-patent trademarked pharmaceutical products primarily under the Dalvance, Bystolic, Canasa, Carafate, Daliresp, Fetzima, Linzess, Namenda, Namenda XR, Saphris, Teflaro, Viibryd, Actonel, Asacol HD, Atelvia, Delzicol, Doryx, Estrace Cream, Enablex, Lo Loestrin Fe, and Minastrin 24 Fe brands.

The North American Generics and International segment develops, manufactures, and sells generic, branded generic, and OTC pharmaceutical products.

The Anda Distribution segment distributes generic and brand pharmaceutical products primarily to independent pharmacies, pharmacy chains and buying groups, and physician's offices.

The company also develops and out-licenses generic pharmaceutical products primarily in Europe through its third-party business; and provides products in women's health, gastroenterology, urology, and dermatology areas.

The company sells its generic and brand pharmaceutical products primarily to drug wholesalers, retailers, and distributors, including national retail drug and food store chains, hospitals, clinics, mail order retailers, government agencies, and managed healthcare providers.

It has a collaboration agreements with Amgen, Inc. to develop and commercialize biosimilar versions of Herceptin, Avastin, Rituxan/Mab Thera, and Erbitux; Ironwood Pharmaceuticals to develop and commercialize Linzessfor the treatment of irritable bowel syndrome with constipation and chronic idiopathic constipation; Sanofi-Aventis U.S. LLC; and Trevena for the development of TRV027. Actavis plc was founded in 1983 and is headquartered in Parsippany, New Jersey."

Both demographics and acquisitions have stimulated accelerating earnings growth since 2011. Nevertheless, Actavis trades at a P/E ratio that is less than its historical earnings growth achievement. However, the normal P/E ratio has moderately expanded as a result of extraordinary growth in 2013 and 2014.

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Importantly, Actavis has also generated cash flow growth that is aligned with its historical earnings growth. Consequently, the company has ample resources to continue funding research and development and its reasonable 36% debt-to-capital ratio is well covered.