Walmart's New Health Food Push: Is It Too Hard to Swallow?
Bonds Are a 'Safe' Investment: A Big Lie Gets Even Bigger
If you've ever needed a drug-coated stent, there's a good chance it was a Taxus stent, which is made by an alliance of Boston Scientific and Angiotech Pharmaceuticals Inc. (USA) (NASDAQ: ANPI). Angiotech produces drugs that prevent inflammation and infection, and it makes its money by combining these drugs with more traditional medical products. It has recently introduced a new wound closer, as well as a less invasive facelift technology, and it has a number of other products on the horizon. The last year has not been good to ANPI's stock price, which has declined pretty steadily from over $15 to near $5. This drop probably has quite a bit to do with growing questions about stents; given that Angiotech relies in large part on its royalties from the Taxus stents, investors may be responding to the medical concerns over stents by selling Angiotech shares.
The funny thing, though, is that ANPI's revenues were up nearly 50% in 2006 over 2005, and its net income for the year was more than double its net income. To be sure, the fourth quarter was a bit rough on the net income, as was the first quarter of 2007, but the share price was declining well before these results were in.
Whatever the reason for this decline, I think this company offers investors a good chance to make a serious profit on ANPI. There is unquestionably some risk given how interest costs on the Taxus royalties have damaged net income over the past two quarters, and ANPI has lowered its earnings estimates for 2007. But this company has a number of good products to offer, and these products are likely to be in increasing demand with our rapidly aging baby boomers. I also liked Angiotech's acquisition of American Medical Instruments, which will allow ANPI to develop its own products rather than relying on alliances with companies like Boston Scientific Corp. (NYSE: BSX).
In other good news, on May 7 it was announced that the Taxus stent had won in a clinical trial against a rival stent produced by a Johnson & Johnson subsidiary.
Type of stock: A growing pharmaceutical company with lots of upside.
Price target: I don't see this stock dropping much below $5, and I think it's a safe buy now -- trading around $6.76. The earnings forecasts for 2007 aren't great, so it may take a while for this stock to start climbing, but I think the stock will be above $12 within the next 18 months.
Hilary Kramer is a financial editor and money coach for AOL and an authority on investing. Visit her at www.hilarykramer.com.
Goldman Earnings Sink After Buffett Dividend
Johnson & Johnson's Income Falls 23%
Burberry Shares Leap on Sales Update
