Today marked intra-day 2009 for the S&P 500 and NASDAQ, although these might not have closed on the highs for the year. Also that won't be known until the formal 4:30-ish closing reset adjustment. This came on the heels of slightly less-bad jobs data and on some confusing retail gains. Unlike earlier Treasury auctions, today's 30-year Treasury Bond auction was a help to the markets as yields reached a high enough level that investors jumped in. Here are today's unofficial closing bell levels:

Dow 8,770.92 +31.90 (0.37%)
S&P 500 944.88 +5.73 (0.61%)
Nasdaq 1,862.37 +9.29 (0.50%)

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In a period of economic distress, owning stocks with stable cash flows is a great way to avoid the carnage found in other parts of the market. One sector traditionally known to provide consistent cash flow to investors is the pharmaceutical industry.

Patent protection on drugs provides the industry with the ability to generate revenue unencumbered by competition. Investors generally pay a premium to own a piece of that stream -- no matter what is happening in the economy.

During the last few years, market premium for drug companies has been diminished. As drugs from the major pharmaceutical makers come off patent, revenues and cash flow suffers.

That fact explains why drug companies invest so much money on research and development. When older drugs come off patent they are replaced by a steady stream of new drugs.

What happens when that pipeline goes dry? Obviously, the company is not worth as much.

That has been the situation at Pfizer (NYSE: PFE). During the last five years, we have been hearing about a dwindling drug pipeline with no sign of abating. During that time, patents for working drugs only aged

For the phamra industry, the long-term trends look promising, especially in light of the aging population. While companies face lots of pressure to cut costs, this is a good thing for the generic drug industry. And, as should be no surprise, we are seeing some dealmaking.

Today, Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) has agreed to purchase Barr Pharmaceuticals Inc. (NYSE: BRL) for a cool $7.46 billion (rumors have been swarming about this deal since July 16th).

Israeli generic-drug maker Teva is looking for opportunities to bolster its markets. Acquiring Barr would give it a nice platform in Europe (this was actually because of an acquisition of Pliva in 2006). What's more, the company has a nice offering of drugs such in the contraceptives category.

Teva, already the largest generic drug company in the world, has gotten even bigger with this deal. Taken together, the combined entity will have revenues of close to $12 billion.

With its resources, Teva can continue to snap up some pretty big deals. In the case with Barr, the premium was a whopping 42% (as of Wednesday's close).

So far in today's trading, Teva's shares are up 2.2% to $42.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

There is a report out of Reuters that may get the drug sector up in a whirlwind if it comes to pass. The implications aren't just that Pfizer Inc. may want to try to counter Japanese drug maker Daiichi Sankyo's bid for a majority stake in India's largest generic drug maker Ranbaxy. Daaichi Sankyo has put in a bid of roughly $4.6 billion for that majority stake.

Pfizer is stuck along with Merck & Co. Inc. (NYSE: MRK) and other Big Pharma drug players between a rock and a hard place as it has a mountain of cash, makes money, but has a perceived weak drug pipeline. If you thought that Big Pharma drug companies were under fire because of generic drugs, the issues may get much more convoluted.

Ranbaxy is India's largest generic drug maker, and India also has some restrictions on foreign ownership of its key companies and infrastructure. Whether or not the Pfizer deal comes to pass, it is becoming more and more inevitable that the big drug companies are going to have to either make more biotech buyouts to purchase better drug pipelines or that generic makers will become targets as a way to fend off the generic pressure. No wonder the short selling is lower in major biotechs.

A graph from the May 2008 issue of Harvard Business Review tells a story about the dumbing down of the global economy.

From an article, Rebuilding the R&D Engine in Big Pharma [subscription required] the graph shows the total shareholder returns for various industries in two time periods: from 1985 to 2000 and from 2001 to 2007. Here are three of the leading sectors from 1985 to 2000 (average annual shareholder returns are in parentheses):

• Pharmaceuticals (20.0%)
• Financials (18.8%)
• IT (17.4%)

Between 2001 and 2007, three of the leading sectors were:

• Energy (15.2%)
• Materials (14.3%)
• Financials (7.0%)

Chantix, an anti-smoking drug from Pfizer (NYSE: PFE), would seem to be good for people. Smoking causes heart and lung problems and who knows what else. The trouble with the drug is that it seems to cause heart problems, called cardiac arrhythmia, all on its own. That seems counter-productive.

The drug may also make some people crazy, at least to the level of causing suicide and depression in a portion of patients.

The Institute for Safe Medication Practices said, "Based on the data available now, the existing warnings are completely inadequate," according to The Wall Street Journal.

The news points to an ongoing problem in the drug industry. Big Pharma wants to get products to market fast and sell as much as it can. Many of the current drugs that get them revenue are going "off patent" and will be sold by generic drug companies. That kills most of the profits on the treatments.

But, in the race to get the drugs out, it seems that side effects are overlooked and overlooked often.

Profits versus people being sick or dead. Hard decision.

Douglas A. McIntyre is an editor at 247wallst.com. and author of the Ten Stocks Under $10 letter.

At their investor day, Teva Pharmaceutical Industries Ltd. (ADR) (NASDAQ: TEVA), the world's largest generic drug maker, said that they expect to double revenues over the next 4 years. Teva predicts that they will grow faster than the generic market. While that is interesting in its own right, their view on the generic market in general is astounding.

"By 2012, Teva expects to have 30% of the U.S. market for generic prescriptions, up from about 20% now. Over 75% of U.S. prescriptions will be filled by a generic by 2012," the company said.

Wow! Three out of every four prescriptions will be filled by a generic in just four years from now. That's huge. If that is indeed the case Big-pharma needs to look out. Where are their profits going to come from? Even the big Bio-tech players are squirming over the possibility of bio-generics.

Teva Pharmaceutical Industries (NASDAQ: TEVA), the world's largest generic drug maker, yesterday announced a change in top management. George S. Barrett, Chief Executive Officer, Teva North America, Corporate Executive VP, Global Pharmaceutical Markets has resigned from the Company. William S. Marth, currently President and Chief Executive Officer of Teva USA, will replace Mr. Barrett and assume the additional role of Chief Executive Officer of Teva North America effective immediately.

Marth is no newcomer to the Israeli TEVA. He has been a key player in the launch of new drugs in recent years. He knows the organization well, and I expect business to continue as is. With a really strong pipeline for '08 and '09, yesterday's 5% drop on the news, presents an attractive entry point for investors who want to catch the generic wave and invest in the 'best of breed' company.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has a position and owns stock in TEVA and is long the stock. He has no positions in any other stock mentioned as of 1/11/08.

Salix (NASDAQ: SLXP) has announced it will launch a generic version of its Colazal (treatment for ulcerative colitis) with Watson Pharma (NYSE: WPI). Mylan (NYSE: MYL), Apotex, and Roxane have received FDA clearance to market their own generic versions of SLXP's Colazal.

SLXP is recently down $1.01 to $8.00 in pre-open trading. Wachovia says, "Valuation range: $9 to $10."

SLXP January option implied volatility of 104 is above its 26-week average of 72 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

Teva Pharmaceuticals (NASDAQ: TEVA) raised its guidance for '07 after Teva launched a generic version of Wyeth (NYSE: WYE) Protonix over the weekend, to the apparent surprise of Wyeth management. It's clear that Teva must have started shipping the drug, and that's why it is raising guidance. Goldman Sachs analyst Randall Stanicky reaffirmed a "Buy" rating on Teva, saying the launch was unsurprising and the company has likely already shipped a decent amount of the generic drug to pharmacies.

This is just the latest in a long line of setbacks for big pharma, as generics continue to scoop up market share of drugs that come off patent. Teva, as the world's leading generic company, continues to grow and has a great pipeline for '08, and as a result the stock should continue climbing as well.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has a position in TEVA and is long the stock. Writer has no position in any other stock mentioned as of 12/24/07.

It was only a couple of months ago when drug maker Novartis AG (NYSE: NVS) announced that it would be slashing 1,260 jobs in the U.S., and today we get news of another 2,500 job cuts worldwide by the year 2010.

Novartis has been particularly hard hit lately in the generic drug market from increased regulatory demands and Increased competition. During the July through September quarter, the company showed that profit fell by over 12 percent. The company did, however, benefit nicely from the sale of its Gerber baby foods and Medical Nutrition units to Nestle SA.

Looking ahead, the company is hoping that it will be able to regain momentum though engineering new drugs and streamlining its units.

Savient Pharmaceuticals, Inc. (NASDAQ: SVNT), surged yesterday on analyst comments regarding their promising new treatment for Gout. Savient is a biopharmaceutical company. It engages in the development, manufacture, and marketing of pharmaceutical products that target unmet medical needs.

Savient makes Oxandrin, which treats involuntary weight loss caused by trauma, surgery, or diseases such as HIV. The company reported a 3rd quarter loss due to increased generic competition for the drug. This is just another in a long line of Pharmaceutical companies to lose market share to the generics. Nonetheless, Citi Investment Research analyst Andrew Swanson started coverage of the drug maker with a "Buy/Speculative" rating and $21 price target. Which is 50% higher than yesterday's closing price.

The company's biggest growth prospect is Puricase which treats gout, a painful inflammation of the joints caused by having too much uric acid built up in the blood. Swanson notes that gout is a large and untapped market, as three million patients await their first new therapy in more than 30 years. At $15,000 per year, even making modest market share assumptions, Swanson's peak sales forecast for Puricase is $600 million.

With such a promising drug in the pipeline this looks like an interesting play. Savient's entire market-cap is $767 million, so this could be a huge opportunity for investors. But as the case with all potential blockbuster drug in trial, if the trial fails, look out below! In a note to clients, Swanson estimates the chance of positive data at 80%, but warned that if the trial fails, Savient shares could fall to as little as $3. Yikes.

Clearly this isn't for the faint of heart, but if you can stomach the potential downside, the upside potential will be well worth the risk.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 11/29/07.

Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA), the largest generic drug maker in the world, has begun enrolling patients in the Phase III clinical trial of oral laquinimod for the treatment of relapsing-remitting multiple sclerosis. The plan is to have 1,000 patients in the trial, which will last between 2-3 years.

Teva already produces Copaxone for the treatment of MS, but has twice tried unsuccessfully in the past to produce an oral drug. This time it is teaming up with the Swedish drug company Active Biotech to trial the oral drug.

If successful, along with Copaxone, Teva will be the clear leader in the fight to treat MS. For the sake of all who suffer from MS, let's hope the third time is a charm, and Teva has success with the oral drug.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Author holds a position in TEVA.

TEVA Pharmaceutical (NASDAQ: TEVA), the world's biggest generic drugmaker, reported that third-quarter net income fell to $525 million, or 64 cents a share, from $606 million, or 74 cents, in the year-earlier period. Sales reached $2.37 billion from $2.29 billion. Consensus estimates of 63 cents of profit on sales of $2.41 billion was expected. While TEVA was a bit light on the revenue line, it beat by a penny on EPS, in large part due to stronger than expected margins.

With a very strong pipeline, and expanding margins, TEVA continues to be the leading large pharma play out there. The stock is trading down today for two reasons. Up more than 50% year to date, the stock was priced for a blowout earnings report, which we didn't get. More importantly, CFO Dan Suesskind announced his retirement. In the company for over 30 years, he is the face of the company to investors, and his departure leaves many nervous. Hi replacement, current Checkpoint (NASDAQ: CHKP) CFO, Eyal Desheh, is no slouch. He knows TEVA well, having worked there for six years and as CFO of a NASDAQ 100 high-tech company, he is well-known on the Street.

For those looking for a long-term pharma play, consider buying TEVA on any weakness.

Disclosure: Author holds both TEVA and CHKP as of 10/30/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

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It peeves me just a little bit that in spite of some significant moves, there seems to be a lack of positive press for Kroger Co. (NYSE: KR). Oh, they received a good bit of spin out of their move to sign on to a series of directives promoting "best practices" for keeping tobacco out of the hands of minors, but those headlines were garnered in the interest of ivory tower politicos fanning their own egos, not in true recognition of Kroger itself.

What really gets me miffed though, is that the introduction of a $4 generic drug program at 76 of Kroger's pharmacies went virtually unnoticed by all except possibly a few hardcore AP writers who, after all, are responsible to report on just about everything.

So in the interest of "broad coverage," I now give you the link to the story at RetailingToday.com (registration required). I think the quip there provides a good, quick revelation regarding Kroger's generic drug efforts and it also makes a nice comparison between where Kroger is headed in the pharmaceutical business and how Wal-Mart (NYSE: WMT) is faring so far in that regard. We might note at this time that Wal-Mart has initiated a second price tier in its discount drug program.

Of additional interest in the Kroger camp was the recent indication by Jim Cramer that Kroger could be moving as high as $36. I won't disagree with that. Note that KR ended trading on 10-26-07 at $28.68, and was headed downward. Amid an overall positive attitude about the company, I believe that this puppy has room to run!