Infotech companies that specialize in trimming health care costs are great picks in 2012

Despite all the talk about trimming health care costs, the reality is that only a fraction of doctors today use money saving Infotech.

Question : What is Infotech?

Answer:  Companies that provide new data systems that link patient records, testing labs, pharmacies, and insurers are HITTING the market.

In 2011 a record $410 Million in health care infotech.  

Startup companies to watch include:

Watermark– has an attachment that a diabetic can stick in your Iphone slot and receive sugar levels from “the cloud”. A doctor is alerted if your levels get too high.

Athena – prints a bar code onto a blood vial to replace the possible inaccuracies that a technician may cause. The bar code is then scanned and electronically sent to the testing lab. The results are then provided to the doctors A/R and to the insurer. Huge savings are realized in labor and errors.

The strategy of these infotech companies to to focus on the chronic disease market that affects 90% of the U.S. population.

Investors should look at this market because only 1% of today’s doctors have “closed loop systems” so the penetration % will grow especially with the new health care laws that favor EHR (Electronic Healt
h Records)

more at www.57thstventures.com

Buy and Bill for Pharma and Biotech in 2012

Buy and Bill is changing the business model for all large and mid cap companies.

The sales rep is only beneficial to the doctor if it can assist him/her in buying the products a the lowest wholesale price and billing quickly enough to recoup the

reimbursement from the insurance company. Investors should look at liquidity ratios on balance sheets. If 30% of A/R are > 90 days and days payable outstanding is increasing it’s a warning flag.

Therefor if the sales rep’s company doesn’t have significant “buyer power” (i.e. Teva, Pfizer, Norvartis, Merck) it’s harder to get a low wholesale price.

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Stalwart Health Care Large Caps need the following characteristics

Our mid and large cap pharma 2012 picks have the following market characteristics

1) Predictable Earnings
2) Good Cash Flow
3) High Return on Investment
4) Conservative accounting (no GAAP gimmicks)

5) Strong Management

Our analysis focuses on extensive technical and channel research.

We interview competitors, customers and portfolio companies!!

Our due diligence includes determining current valuation levels vs the market, analyzing competitors stock prices with similar financials

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Free Research Trials

Norvartis has upside but patent expirations are a cause of investor concern

In on corner we have a 54 Billion dollar diversified pharma juggernaut with

4% dividend yield

147 drugs in its pipeline including kidney-cancer dug Afinitor, MS drug Galvus and hypertension drug Tekturna

Diversification of business including Sandoz ($8.5 billion in sales), consumer product business ($6.2 billion) and vaccine sales of $2billion

 

So what’s the problem

Well 60% of their current $54 Billion is in branded pharma and 3 blockerbuster have looming patent expirations including

Diovan – High Blood pressure that’s facing patent expiration in 2012

Gleevec – Cancer that’s facing patent expiration in 2013

Zometa – Cancer that’s facing patent expiration in 2016

so it’s recent focus on “cost control” (i.e. laying of 2,000) is merely a stop gap measure to preserve operating margins and flow thru to EPS

the real question is  Can they grow top line revenues to command such a healthy premium over Pfizer?

We at 57thstresearch DOES NOT  think they can get to a stock price of 70 and a 12+ forward earnings range without another ALCON type of acquisition.

We say wait and see and don’t load up on NVS at this current price.

Check our other free research on NVS here www.57thstventures

Japanese Drug Market top 3 in Market Share is changing

Japanese Drug market $100 billion is second in the world behind the US. Yet the top 3 in market share make up only on 17.7% of the market! There’s a huge opportunity for Merck, Roche and Astellas to make significant inroads into the lucrative Japanese Drug Market!

#1) Increase G&A marketing expenses to take advantage of “direct to consumer” that Japanese consumers are embracing! Promo activities like newspaper advertising and sales reps calling on doctors

#2) increase pipeline by looking to buy or have joint venture with Eisai or Mitshubishi Tanabe

#3) Create more social awareness to overcome society stigmas thru social media campaigns

Search our blog for more or read more research exerpts at 57th St Ventures

Sorrell vs. IMF Health goes deep inside business of pharma data mining techniques

There is a landmark case that speaks to the hot button issue of PRIVACY.

The case challenges a Vermont Law that letting doctors decide whether their names can be sold 

to pharma companies for marketing purposes.

Here’s how it works currently (Step 1)  Pharmacists sell the information to data mining companies , which then sell

data and analysis (i.e. which customers would be great prospective prospects for “detailing”) to pharma companies WITH

PATIENT NAMES removed or encrypted.  That data fuels drug companies CRM efforts using companies such as ZS Associates

to do statistical regression studies that present data on prospects, territories profiles etc.

The outcome is purely based on Free Speech and is likely to be won by the 3 data companies (IMF Health, SDI Health and Source Analytics).

Sign up to our blog to find out the latest or <SEARCH> now.

 

Pfizer (PFE) mulls spinning off nutrition business for $6.8 Billion Can it grow earnings as it becomes smaller?

Pfizer Inc. (PFE) is mulling a spinoff of it’s nutrition business that could command a price tag of $6.8 billion.

What do you think? PFE wants to be like Bristol Myers (BMY) cause it took Mead Johnson Nutrition Co. (MJN), the baby-formula maker public in February 2009, now trades at 23.1 times adjusted earnings, more than twice the valuation of its former parent or Pfizer, after a 133 percent surge that beat the Standard & Poor’s 500 Index’s 52 percent rise. Applying Mead Johnson’s profit margins and valuations to Pfizer’s own nutrition unit, which had $1.87 billion in sales last year, would give it a market value of $6.8 billion..give or take a few cents

While Bristol-Myers outperformed U.S. drugmakers by 20 percentage points since announcing plans for Mead Johnson’s initial public offering in April 2008, Pfizer fell in the same period and has the third-lowest price-to-earnings valuation of S&P 500 pharmaceutical companies.

Read more about the baby nutrition market at www.57thstventures.com

Investors are now pressing Pfizer’s Chief Executive Officer Ian Read to slim down the company and focus on new drugs as it faces the loss of exclusivity for its Lipitor cholesterol pill. Investors and shareholders are pushing for value-creating strategies.

Today’s Trading

Pfizer shares climbed 34 cents, or 1.8 percent, to $19.64 at 9:42 a.m. on the New York Stock Exchange. Bristol-Myers advanced 44 cents, or 1.8 percent, to $25.41, while Mead Johnson gained 25 cents, or 0.5 percent, to $56.06.

Pfizer and Mead Johnson both make infant formula and nutrition drinks for children and expecting mothers as burgeoning middle classes in emerging markets drive demand. Overall sales of baby food in Asia, Latin America and Eastern Europe more than doubled from 2005 to 2010

Mead Johnson, which analysts project will post a 20 percent increase in net profit this year, has a market capitalization of $11.4 billion. Its 133 percent rally since Feb. 10, 2009, has outstripped the 33 percent advance in the S&P 500’s gauge of 41 companies that sell consumer staples from foods to household products, data compiled by Bloomberg show.

‘Positive Development’

The spinoff was “a positive development for the company,” Chris Perille, a spokesman for Glenview, Illinois-based Mead Johnson, said in a telephone interview. “We have been better able to invest for growth in our business than would have been possible as part of a larger pharmaceutical company.”

The maker of the Enfamil infant formula turned every dollar of sales into 14.4 cents of profit last year, according to data compiled by Bloomberg. Applying Mead Johnson’s profit margin and share price valuation of 25.2 times net income to the $1.87 billion of revenue posted last year by Pfizer’s nutritional unit would produce a market value of $6.8 billion, the data show.

Mead Johnson offers a guide for the valuation that Pfizer’s unit may command because they offer similar products and compete in many of the same markets, according to Linda Bannister, an analyst at Edward Jones & Co. in Des Peres, Missouri.

Emerging Markets

Selling the nutrition business would be a change of strategy for Pfizer. The company diversified by buying Wyeth to add biologic drugs, consumer and animal health products and baby formula. It also boosted sales in emerging markets such as China, India and Brazil to 18 percent of the company’s revenue under Jeffery Kindler, who Read replaced in December.

Mead Johnson’s revenue of $3.14 billion last year outpaced Pfizer’s unit by 68 percent, data compiled by Bloomberg show.

“If they spin out nutritionals and get a Mead Johnson-type price, it would add value to Pfizer shareholders,” Barbara Ryan, an analyst at Deutsche Bank AG in New York, said in an interview. “The question is: what are the business costs in terms of Pfizer building its emerging-market platform?”

Bristol-Myers has climbed 17 percent since saying on April 24, 2008, that it planned an IPO for Mead Johnson. That compared with a 3.3 percent drop for the S&P 500’s gauge of 11 pharmaceutical companies and a 2.9 percent decline for Pfizer, data compiled by Bloomberg show. Bristol-Myers still trades at 11.4 times profit, less than half of Mead Johnson’s valuation.

Mead Johnson Stake

The drugmaker said in November 2009 that it would separate its remaining 83 percent stake in Mead Johnson in a tax-free transaction that retired 270 million Bristol-Myers shares and reduced dividend obligations by $335 million a year.

The split off of Mead Johnson “was a key part of our biopharma strategy,” Jennifer Mauer, a spokeswoman for New York-based Bristol-Myers, said in a phone interview. “It allows all of the company efforts and resources to be focused on developing medicines for serious diseases.”

The move was part of former CEO James Cornelius’ strategy to shed non-pharmaceutical businesses and build up the pipeline of experimental drugs through partnerships and acquisitions.

Bristol-Myers will have generic competition next year for its Plavix blood thinner, which generates about a third of the company’s revenue.

Lipitor Pill

Pfizer faces the loss of exclusivity of its biggest drug, the Lipitor cholesterol pill, which accounts for about 16 percent of its sales, data compiled by Bloomberg show. The company forecasts revenue may fall as much as 2.7 percent this year as the pipeline of experimental drugs fails to offset lower sales of Lipitor.

Pfizer may sell businesses that account for almost half of its revenue,  The company may divest four non-pharmaceutical businesses as well as its established products group, reducing sales to $35 to $40 billion from $67 billion, he said.

The nutrition unit would be an easy candidate since its products don’t match up with the rest of Pfizer’s offerings and the business was acquired recently, Anderson wrote.

Nestle SA (NESN) of Vevey, Switzerland, or Paris-based Danone (BN) may be interested in purchasing Pfizer’s nutrition unit after a spinoff

Nestle, Danone

If Pfizer were to sell its baby-formula division, it may be worth more than $7 billion, based on Mead Johnson’s earnings and previous deals in the pharmaceutical industry

Mead Johnson generates 24.7 cents of earnings before interest, taxes, depreciation and amortization for every $1 of sales. At that level Pfizer’s unit would have posted Ebitda of about $461.7 million last year. Based on the median multiple of 15.4 times Ebitda for U.S. pharmaceutical takeovers greater than $1 billion in the last 10 years, the nutrition company may fetch $7.1 billion, the data show.

Pfizer’s shares are currently trading at 8.5 times profit. That’s the third-lowest of any company in the S&P 500 Pharmaceuticals Index, afterForest Laboratories Inc. (FRX) of New York and Indianapolis-based Eli Lilly & Co. (LLY), which are valued at 7 times profit

“Bristol shareholders are now also shareholders of Mead Johnson, and Mead Johnson has performed fabulously well,”

“Pfizer unlocking some value, making the company smaller: I think that is a good idea and those are welcome moves from a shareholder perspective.”

 

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