We've talked a lot about the housing and financial services industries and how they've been the source of much of the downward pressure that the market saw in 2007. Today, I'd like to talk about an industry that's usually considered "defensive" because many investors seek it out when the market heads south. I'm talking about healthcare, and if you think we're too savvy here at Asia Edge to be investing in big, old, defensive healthcare stocks, you're only half right.
Our new buy this week is not your typical U.S. healthcare company like Johnson & Johnson or Pfizer who have completed their growth phase and are now facing problems like drug patent expiration. The company that I want you to buy isn't going to chug along like the dinosaurs in this industry -- it's going to capitalize on two big problems facing healthcare.
The first problem is the rising healthcare costs in the United States. One easy way to lower healthcare costs is to prescribe more generic drugs. The government is trying to encourage the use of generic drugs by creating legislative incentives for pharmacies, drug stores and pharmacists to dispense more generic medications.
Secondly, there's a major change ahead for the drug industry: 10 of the world's 12 biggest drug firms face the loss of patent protection for their biggest drugs beginning in 2011. Billions of dollars worth of brand-name drugs are due to go off patent over the next few years. As a result, I believe more generic drugs will enter the global market to cut healthcare costs and fill the void left by brand-name drugs without patents.
The best-positioned company to benefit from these trends is through an Israeli company that's the world's largest generic drug maker. The company, founded in Jerusalem in 1901, specializes in the development, production and marketing of generic, branded and proprietary pharmaceuticals, biogenerics and active pharmaceutical ingredients.
The company has manufacturing plants and marketing facilities in Israel, India, Europe, Mexico and the United States. Nearly 60% of its sales are to U.S. customers and 25% of its sales are to Europe. With operations in 60 countries and approximately 26,000 employees worldwide, it offers the widest range of cost-effective pharmaceuticals, both generic and branded, to consumers and healthcare providers.
The company focuses on drugs for central nervous system disorders, autoimmune diseases and cancer. Its innovative pipeline boasts new treatments for multiple sclerosis (MS), in addition to new formulations or combinations with the MS drug Copaxone. The company is also working on treatments for Parkinson's disease, Alzheimer's disease, Lupus, hematological cancers and various solid tumors.
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