2 drugmakers with buyback kickers

Big pharma is buying back shares, and these two companies have exceptional potential.

By MoneyShow.com May 2, 2013 2:18PM

Pills © SuperStockBy David Fried, The Buyback Letter

Two of our latest additions to this portfolio are in the biotech and pharmaceutical sector: United Therapeutics (UTHR), where management has reduced shares outstanding by 6.3% in the last 12 months, and Mylan (MYL), which has reduced shares outstanding by 7.3% in the last year.

United Therapeutics is a biotech that focuses on developing drugs for small niches with unmet needs. Their main drug targets a high blood pressure disease between the heart and lungs. The disease occurs in young women, with an estimated 30,000 being treated in the US. It's a small market, and because of the unfulfilled needs, the pricing power is high.

United Therapeutics has three existing pulmonary arterial hypertension drugs on the market. Its lead product is an injectable treatment called Remodulin. It has recently had some run-ins with the FDA over its oral Remodulin, which it would like to get approved for the treatment of pulmonary arterial hypertension.

The company reported fourth-quarter results in late February. Revenue was up for 2012, from $195 million to $244 million, which boosted earnings to $1.65 per share from $0.79 year-over-year.

Analysts consider this stock relatively cheap compared to its competitors in this sector -- Novo Nordisk (NVO) and Roche (RHHBY) -- and with a very low debt-to-equity position. Remodulin made up nearly 50% of total sales.

Mylan is a global pharmaceutical company that provides medicine for 7 billion people through a portfolio of some 1,100 generic pharmaceuticals and several brand medications. It offers a wide range of antiretroviral therapies, upon which approximately 40% of HIV/AIDS patients in developing countries depend.

The company also operates one of the largest active pharmaceutical ingredient manufacturers and currently market products in some 140 countries and territories, through a workforce of more than 20,000 people.

Mylan has a strong generic product portfolio and pipeline. As of early April, the company's generic unit had 178 ANDAs (Abbreviated New Drug Applications) pending approval by the U.S. FDA. Mylan believes that 35 of these pending ANDAs are potential first-to-file opportunities, and represent an estimated annual branded sales worth $20.3 billion.

Analysts like Mylan's geographic reach and product depth, along with its robust generic pipeline and focus on emerging markets, which contribute to its overall growth. Over the long term, the biggest opportunities for growth in the generics industry would be expansion in emerging markets.

With a market cap of $11.4 billion, a trailing 12-month revenue of $6.8 billion, and a ROI of 14.7, analysts think this stock should continue to see rapidly expanding revenues due to the patent cliff and expanding prescription drug coverage.

Add a robust share repurchase program and a stock that has trounced the S&P over the past five years, and we may just have a winner!

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