From Cabot Wealth Advisory 1/11/10 Sign up for free Cabot Wealth Advisory e-newsletter
If you’re looking for rapid growth, you might want to look at a company that I recently labeled “The Next Pfizer.” The company is Warner Chilcott (WCRX), and it was first recommended in Cabot Top Ten Report on August 31, when it was trading at 20.
More recently, I featured it as a selection in Cabot Stock of the Month, writing this:
“Back in 2000, a little Irish pharmaceutical company named Galen bought U.S.-based Warner Chilcott (a division of Warner-Lambert) and proceeded to run a very profitable business, focusing on dermatology and women’s health care (a third of the business is oral contraceptives). Profit margins were high and cash built up. So this year, management, buoyed by the success of their big acquisition, decided to do it again, and in August they acquired the prescription drug business of Procter & Gamble for $3.1 billion, effectively tripling the company’s size.
“Medicines acquired in the deal include Ascol HD delayed release tablets for ulcerative colitis, Actonel for osteoporosis, and the co-promotion rights to Enable for the treatment of overactive bladders as well as 2,300 employees and manufacturing facilities in Puerto Rico and Germany. (Procter & Gamble, meanwhile, by disposing of its pharmaceutical efforts, can focus on the consumer health business.)
“At the time, Warner Chilcott CEO Roger Boissoneault commented, “The acquisition of the P&G pharmaceutical brands and employee talent is a transformational, strategic move for us. The acquisition transformsWarner Chilcott into a global pharmaceutical company, expands our presence in women’s healthcare, establishes us in the urology market in advance of the anticipated launch of our erectile dysfunction treatments, and adds gastroenterology therapies to our product portfolio.”
“What particularly impresses us—and makes us confident this acquisition will pay off big-time—is the firm’s stellar growth record; the company’s revenues have grown in each of the past 10 years. Even through last year’s global recession, both revenues and earnings kept on growing!”
Today, WCRX is trading near 28, having pulled back for a week. The 25-day moving average is quite close, offering support, while the 50-day is down at 26. Buying here is likely to work out fine in the long run, though risk-averse investors will want to wait for a deeper pullback.
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