Shionogi's Strong Core Offers More Capital Return Possibilities

Japanese drug companies are quite a bit different than U.S. and European pharma companies, partly because the pricing/reimbursement environment is much different, but those differences aren’t always bad. In the case of Shionogi (OTCPK:SGIOY) (4507.T), investors can take advantage of a highly profitable company with a strong HIV franchise and a willingness to simultaneously walk that fine line between reinvesting in the growth potential of the business and sharing the benefits with shareholders.

Shionogi’s ADRs are not particularly liquid, and that is an issue for investors to consider, though the shares listed in Japan offer ample liquidity. Although I’d like to see a more efficient sales and marketing operation from Shionogi, the company’s pipeline has exciting assets both in late and early stages of development, and I believe investors can reasonably expect a high single-digit/low double-digit long-term annualized return from these shares.

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Shionogi's Strong Core Offers More Capital Return Possibilities

Where Does Lundbeck Go After A Brutal Round Trip?

I had suggested investors lighten up on Danish drugmaker H. Lundbeck A/S (OTCPK:HLUYY) (LUN.KO) earlier this year, and I wish I had fully followed my own advice and sold out my position, rather than just meaningfully reducing it. Between ongoing disappointments in the performance of its new drug portfolio and the crushing disappointment of its only novel late-stage asset, Lundbeck shares have plunged almost 50% from the mid-year high and now sit down about 10% for trailing 12 months (and back where it was at in late 2016).

At this point I think there is an argument that Lundbeck shares are undervalued, but that will be a tough argument to sell to the Street given the company’s virtually empty late-stage cupboard and the ongoing challenges in its portfolio of recently-approved drugs. On the plus side, Lundbeck has a clean balance sheet and should generate significant cash flow in the coming years, giving management a better set of options to boost the portfolio and near-term performance.

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Where Does Lundbeck Go After A Brutal Round Trip?

Marinus Looks Like More Than A Me-Too

Developing safe and effective drugs is hard, and doing so in the CNS space is even harder than normal. Add in worries that your lead (and only) drug is just a “me-too” product doomed to languish in the shadow of a celebrated advance in the field, and I suppose it makes sense that Marinus (MRNS) would have well-above average volatility.

I may be fundamentally mistaken, but I believe Marinus’s drug ganaxolone is more than just an attempt to hitch a ride on the coattails of Sage Therapeutics’ (SAGE) lead drug brexanolone. While Sage will likely enjoy a meaningful head start getting its drug to market in post-partum depression, I don’t believe that lead will cripple Marinus, and I believe there’s still upside here if ganaxolone proves to be a respectable second-place finisher.

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Marinus Looks Like More Than A Me-Too

Lundbeck Looks Largely Played Out

I’m often sloth-like when it comes to selling positions in good companies, but it looks to me like the time to part company with H. Lundbeck A/S (OTCPK:HLUYY) (LUN.CO) may be close at hand. Despite concerted efforts to differentiate its new product portfolio, Lundbeck is struggling to gain much headway versus generics in the U.S., while generic competition continues to threaten lucrative profit centers in the mature portfolio. What’s more, the cupboards are pretty bare when it comes to the pipeline, and though management seems more positive on M&A than it has in the past, early-stage assets aren’t likely to garner much enthusiasm.

Lundbeck shares are trading around my fair value, suggesting a total return potential in the high-single digits – which really isn’t too bad today (and part of the reason I’ve been slow to sell). The announcement of a new CEO could also be a stock-moving event (in either direction), as he or she will likely have a vision for Lundbeck that offers at least some change from today. I don’t believe my low single-digit growth expectations are all that aggressive, but these shares are looking pretty “meh” after a strong run driven by new launches and rigorous cost restructuring.

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Lundbeck Looks Largely Played Out

Investopedia: Intuit's Valuation A Sign Of The Times

Maybe Intuit (Nasdaq:INTU) is a good microcosm for the market and the economy. Business conditions are better, but not great, and that is especially true in the small business category. The market, though, has rewarded the rebound handsomely and so while the stock has been a very strong performer, it is now at a point where valuation, quality and future prospects seem balanced. In other words, the market has certainty caught up to the economy and it looks like there could be more risk than reward if valuations go much further. 

Intuit's Third Quarter Wasn't Taxing  
Intuit delivered respectable fiscal third-quarter results, largely on the back of a solid performance in the consumer tax business (the TurboTax franchise). Total revenue rose 15% in the period, fueled in large part by the 18% growth in consumer tax preparation. The company saw an 11% increase in TurboTax units through tax season, even though H&R Block (NYSE:HRB) held up a lot better than some had expected. Interestingly, for as much talk as there is about Intuit's opportunities in areas like software-as-a-service and mobile apps, the consumer tax business is still about one-third of the company's full-year revenue base. 


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http://stocks.investopedia.com/stock-analysis/2011/Intuits-Valuation-A-Sign-Of-The-Times-INTU-HRB-ADP-PAYX-ORCL-SAP-EBAY0524.aspx