It's usually a great idea to buy proven long-term winners when the Street goes momentarily sour on a company's ability to stay in the game for the long-term. Companies as different and varied as Coca-Cola (NYSE:KO), McDonalds (NYSE:MCD) and Stryker (NYSE:SYK) have rewarded contrarian thinking, and it is an established investment philosophy.
The question now is whether Teva Pharmaceuticals (Nasdaq:TEVA) is just such a play. Not only has the company had to deal with recent FDA violations in its facilities, but there is now widespread concern about the company's ability to maintain its lucrative multiple sclerosis franchise. What's more, there is another potential risk on the horizon - the end of a major run of patent expirations that have fueled generic growth across the industry. (For more, see 6 Drug Companies With Expiring Patents In 2011.)
Trouble in a Lucrative Franchise
Biogen Idec (Nasdaq:BIIB) recently released favorable trial results on its oral multiple sclerosis drug candidate BG-12. This drug showed more than double the rate of two-year relapse reduction (49%) of Teva's drug and a similar reduction in disease progression (38%). Like Teva's laquinimod, BG-12 is an oral drug, and also like Teva Biogen has an established MS business in place (selling drugs like Avonex and co-marketing Tysabri with Elan (NYSE:ELN).
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