: My broker recommended me strongly to buy this stock?
: Any comments?
If your broker is recommending a dog like this, there is only one
intelligent response on your part... Get a new broker!
I have to agree. Your broker seems to be more of an amateur than
I am. I have been following the commentary on Syntex, tempted
by its high yield, good cash position, and the takeover rumors.
But from what one reads, the dividend is in jeopardy, because their
best selling drugs have gone off patent and they have had to slash
prices to keep market share. They have nothing in the pipeline (the
FDA approval process for new drugs), and no indications of much
to come in the next couple of years. The pipeline vital to the
future performance of any drug company. They apparently cut back
on R&D in a cost cutting move a few years ago. As for the takeover
possibility, I read recently that they may not be so desirable
after all for this reason: Syntex is incorporated in Panama, which
has something like a 6% corporate income tax rate. The concern is
that if they were taken over by an American company the IRS would
not allow them to carry that forward, and the new rate would be
28%. So as a takeover candidate, one analyst suggested that Syntex
was not worth more than $13 and possibly less.
Of course, your broker might be on to something, but I would ask
him for details. After all, you are not paying his high commission
for hot stock tips but for good research and sound analysis.
(My own opinions)
I may have posted this already some time ago, but I heard the
pharmacologist on the People's Pharmacy (an NPR program) discussing
the potential of Naprosyn as an OTC drug (I think it's called Alieve
or something like that), and he was so excited about it he could hardly
keep himself contained (I'm exagerating a bit).
His point was that when a block buster drug like this comes off patent
the total volume shipped is much greater than when it was on patent,
and in some cases the total sales actually increase many times more than
when the drug was on patent.
He seemed to think that another OTC pain reliever would do quite well
and compared this to Ibuprfen when it went off patent. Ibuprofen sales
skyrocketed (I can't remember the figure) after its patent expired for
the simple reason that folks no longer needed a prescription to get this
drug, and for the many people who experience no significant effect using
aspirin, this provides the incentive to get out and use this 'new'
drug. He also stated that profits from Ibuprofen are much higher than
when it was protected by patent.
Some of you drug gurus could probably give the exact figures on this,
so please do.
My point is that Syntex may actually benefit from this, in which case
Syntex is not a $13 stock (but rather 20? 30? 9.9e^9?).
J. Andrew Royle ro...@stat.ncsu.edu (919) 515-7181
Dept. of Statistics
NCSU "All models are wrong, but some are useful" - George Box
I may have posted this already some time ago, but I heard the
>pharmacologist on the People's Pharmacy (an NPR program) discussing
>the potential of Naprosyn as an OTC drug (I think it's called Alieve
>or something like that), and he was so excited about it he could hardly
>keep himself contained (I'm exagerating a bit).
Coming off patent is not the same as going OTC. Is Naprosyn now
or about to become an over-the-counter drug?
I think it is about to go OTC, as Alieve. But, I do not own Syntex
this is how I remember it from the radio program about 1 month ago.
Perhaps one of the net Syntex gurus can clarify this.
>(My own opinions)
Yes, Syntex has a deal with Proctor&Gamble to sell Naprosyn over the
counter by the name of Aleve. Business Week had a good article on this
and the anticipated impact on the already crowded OTC pain reliever market.
P&G will start marketing Aleve agressively in the next couple of months.
Their campaign is expected to play up Aleve's 12 hour dosage - longer than
others on the market - and its proven effectiveness against arthritis pain.
BW came off as bullish on Aleve's chances in the market as well.
>BW came off as bullish on Aleve's chances in the market as well.
Now there is a reason to short the stock.
Did I say bullish? I meant bearish - yeah, that's right - bearish.
Yeah, that's what I meant...
I think your broker is VERY confused about the patent vs over-the-
counter drug approval process. A drug can go off patent but that
DOES NOT MEAN the drug automatically becomes an over-the-counter
drug. Many drugs go off patent, but they still need a prescription
in order to be obtained. A whole new FDA approval process must
be iniated for a drug to go over-the-counter. I think you should
drop this broker as FAST AS POSSIBLE and find one that knows atleast
the basics of the drug industry.
>He seemed to think that another OTC pain reliever would do quite well
>and compared this to Ibuprfen when it went off patent. Ibuprofen sales
>skyrocketed (I can't remember the figure) after its patent expired for
>the simple reason that folks no longer needed a prescription to get this
>drug, and for the many people who experience no significant effect using
>aspirin, this provides the incentive to get out and use this 'new'
>drug. He also stated that profits from Ibuprofen are much higher than
>when it was protected by patent.
>Some of you drug gurus could probably give the exact figures on this,
>so please do.
>My point is that Syntex may actually benefit from this, in which case
>Syntex is not a $13 stock (but rather 20? 30? 9.9e^9?).
Sorry, but my opinion is that Syntex is a dog. There are MUCH
stronger plays. (Merck, Bristol, Pfizer, Ivax, Zenith, Watson
are the ones I track, especially the last three). Brook>
: >BW came off as bullish on Aleve's chances in the market as well.
: Now there is a reason to short the stock.
Here again I'm coming to the rescue of a company I like. Syntex has some
problem no doubt. But, to short the stock at 12.75$ would not be very
wise. Syntex is not going bankrupt. Sales of Naprosyn will be halved this
year because of patent loss. They will lose only half because Hamilton, a
subsidary of Syntex, owns 90% of the generic competition for Naprosyn. So
sales of Naprosyn (in the US only) will be 50% of last year. So, from my
calculation Syntex will earn 1.50$ in 1994 and 1995. In 1996, with SG&A
down 20% from 1994 (see restructuring) and with a small contribution from
Aleve, Syntex should earn around 2.00$. Since EPS will be higher than the
dividend, dividend cut is unlikely unless a major move is made by the
company. Syntex has also 700$ millions of cash, that is 3.50$ per share.
So they could buy a biotech company to compensate a weak pipeline. You can
buy a pretty good set of pipelines with 700$ millions! Cash-flow are
enough to cover dividend and capital expenditures (which were 40% lower in
first half of 1994).
So the stock trades at 8 times 1994 and 1995 EPS. With a 8% dividend, you
don't need much from the stock, at this level. Syntex is in an excellent
financial health and the stock could easily trade at 25$ in 1995-1996.
This is not a screaming buy but it could be very rewarding and the
downside from here is quite limited. The stock is oversold on fundamental
Francois Rochon -----> roc...@inrs-telecom.uquebec.ca
telephone : (514) 761-8633
I agree with everything Francois has to say EXCEPT that the dividend
is NOT safe. I expect a cut in SYN's dividend within a year. It'll
be really stupid on SYN's part to pay dividends out of their cash
reserves - especially at a time when they need more cash to feed
their pipeline and the advertising campaign for Aleve.
AHP plans to step up advertising for Advil when Aleve tries to
make it bid into the analgesics market..... so is JNJ
in an attempt to maintain their stranglehold in the analgesic market.