Cash Takeovers

Was it a coincidence that the market took off exactly when it was announced that Sanofi is making a nearly $20 billion bid for Genzyme? Was the rally really about the stress test? There are not many things more bullish than large cash takeovers. They put cash in the hands of stockholders who for the most part turn around and put that cash right back in the market. Have a great weekend.

4 comments:

Anonymous said...

OMG Tsachy. You should just wear a t-shirt that reads BULLISH.

Anonymous said...

you are big on healthcare sector. What is your opinion on Teva? I was surprised you didn't play Teva for a trade but you took your chance on GILD.

Anonymous said...

Teva got very good news and very bad news on Friday. Good: the approval of Momenta's generic Lovenox means that Teva's generic Lovenox may also be approved. Bad: Momenta is also trying to get approval for a generic Copaxone, an MS drug that accounts for 20% of Teva's revenue and even more of its profits. Teva has a problematic business model: they make most of their profits on drugs in the first six months if they have the first approved generic. They are like a hamster on a treadmill, trying to get an ever larger number of approvals. If one wants to invest in generics, one is better off with an Indian firm, one of the true low cost producers. Also, even after its 80% run-up Momenta looks cheap. Momenta is a play on the emergence of bio-generics.

Tsachy Mishal said...

Teva does seem cheap until you look at the multiples on other bio-pharma companies. I believe the whole group is cheap including Teva now.

The nice thing about Teva is that the generic business will always be around and the multiple is now low so even if their is some profit margin erosion due to competition or austerity programs it is largely priced in.

Teva has been a darling and is probably undergoing the same transformation as other bio-pharma companies have undergone, going from growth/momentum portfolios to value portfolios. I think other companies are further along and cheaper like Gilead. But Teva is getting there and getting intersting.