by Hilary Kramer | January 29, 2013 7:00 am
President Obama was sworn into office for a second term a few days ago. And while a continued Obama presidency affects several areas of the investing world, perhaps none is more apparent than healthcare.
I expect certain areas of healthcare to do well, as Obama’s re-election makes the road to broader insurance coverage inevitable, with the potential for 30 million uninsured to be covered starting in 2014. This ultimately means more money flowing through the system.
I think now is a good time to get into a couple areas of healthcare, including generic drugs and heart disease treatment. Generic drug prices are much more affordable for patients and, more importantly, for the insurance companies and government entities paying for the medications. And as long as heart disease is around, there will be a strong demand for companies that have products to fight it.
Based on those thoughts, here are a couple stocks I like:
Insurers, of course, want to save money however they can, which is one reason I really like a company you might not have heard of: Lannett (AMEX:LCI).
Lannett develops, makes and sells generic drugs — an industry that should see strong growth as healthcare reform moves ahead in Obama’s second term. The election provides a nice tailwind for a company already in solid growth mode, with revenues increasing 70% from fiscal 2008 to fiscal 2012 (which ended in June).
LCI has approximately 30 products on the market. The top five are the real workhorses, bringing in nearly 70% of revenues in the last fiscal year, with the top two contributing 50%. They are levothyroxine sodium tablets (a generic version of the thyroid treatments Synthroid and Levoxyl) and digoxin (a generic version of the congestive heart failure drug Lanoxin). Both products are part of a distribution agreement Lannett entered in 2004 with Jerome Stevens Pharmaceuticals. That agreement ends in two years, and the companies have entered preliminary talks to extend it. A successful outcome should be a nice catalyst for the stock.
Another possible catalyst is the large number of developing products, including several in late-stage testing that have large potential markets. In total, LCI has 40 drugs in development, and 15 of them are waiting on approval at the FDA. Several would expand the company’s pain management franchise. There’s also a potential new generic version of thalidomide; the branded version — Celgene‘s (NASDAQ:CELG) Thalomid — has annual sales of $339 million globally. If it is approved, LCI would receive higher-than-normal margins because it is the first generic company to file for approval.
Vascular Solutions (NASDAQ:VASC) is on my list of companies to benefit as well. VASC is a little-known medical device company that is leading the fight against heart disease — the No. 1 killer in America, and something that even a global economic slowdown can’t stop.
VASC is an innovator in the field of cardiovascular medical intervention devices, has a strong history of developing products that meet unmet needs, and stands to benefit from the growth of the entire industry.
What’s great about this company is that it doesn’t just have one product. Vascular Solutions has quite a few that fall into three main categories: catheters, hemostasis products and vein products.
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