The dermatological therapeutics market is estimated to grow at CAGR of 7.3% from 2010 to 2015. Driven by the expiration of patents and a steep rise in cases of psoriasis, acne, dermatitis and other skin conditions, the dermatological industry is expected to reach an impressive $ 25 billion by 2015. On the other hand, the global neurology devices market was expected to grow at a CAGR of 11.3% from 2008 to 2015 to surpass $4 billion by 2015.
Other revenue drivers of the company include OTC drugs and branded generics. The OTC drugs industry is estimated to exceed $ 70 billion by 2015. As against that, the branded generics segment accounts for 22% of the Valeant’s total revenue.
With the global generic market place set to grow at a respectable 11 % annually, emerging markets such as Brazil, Russia, Turkey, China and South Korea provide a robust platform for growth at a phenomenal 15-20 % annually. Given that Valeant’s key markets of operation are predominantly emerging growth markets, the future prospects for Valeant’s generic drug business look quite promising.
The Competitive Landscape
TEVA Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is one of the key competitors to Valeant Pharmaceuticals.
TEVA Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is a developer, manufacturer and distributor of pharmaceutical products on a worldwide scale. The company possesses a diverse product portfolio, primarily comprising of specialty medicines, generic and OTC drugs and active pharmaceutical ingredients.
The first quarter of 2013 was in line with the company’s expectations. It clocked an overall revenue of $4.9 billion and generated over a billion dollars in cash flows from operations.
The company suffered a 27% year over year decline in revenues from its generic segment in US, which is also its largest market contributing over 50% to its overall revenues.
Moving further, strong performance in Europe in all key segments clocking an overall growth of 11% year over year facilitated the company in sustain a robust performance during the quarter.
In order to bolster its growth, the company has been very aggressive on the Merger &Acquisition front, as it acquired Taiyo and Ratiopharm, which enabled the company into strengthening its generics business. Furthermore, the company also acquired Cephalon in order to penetrate the bio pharma space.The company possesses a strong balance sheet and presence across all major markets.
Another competitor to Valeant is Abbott Laboratories (NYSE:ABT). Although Abbott Laboratories (NYSE:ABT) a much larger company relative to Valeant in terms of market capitalization, both are pharmaceutical giants.
Abbott Laboratories (NYSE:ABT) generates the highest percentage of its revenues through pharmaceuticals at around 62%, which is followed by nutritionals at around 18%. The remaining revenues come from diagnostics and vascular at around 12% and 8% respectively.
Within the pharmaceuticals division, Abbott Laboratories (NYSE:ABT)’s revenues are driven through AndroGel and Synagis. During 2009, revenues from AndroGel and Synagis declined slightly, however, the growth was back on track from 2011 onwards.
According to Trefis, this division holds maximum value in Abbott Laboratories (NYSE:ABT)’s stock price. Trefis estimates a steady increase in revenues from AndroGel and Synagis over the next seven years. It should be well comprehended by investors that consistent growth in revenues from this divisions will ensure a healthy pay-out from Abbott Laboratories (NYSE:ABT)’s stock.
Conclusion
Valeant is a large specialty pharma company with a strong potential for upside growth in its top and bottom line in the medium to long term.
The company has been successful in developing a diverse business portfolio on the back of carefully designed expansion strategy, which makes the company resilient and competent to meet the dynamic challenges of the industry.
The impending acquisition of Bausch and Lomb will certainly ensure Valeant strengthens its ophthalmology division and catapults itself in the global league to become the 15th largest pharma company in the world and a significant player in the pharma segment.
With global economies on path to recovery and Valeant having exposure to the emerging markets, I believe it has a great future in store for itself.
The article This Pharmaceutical Stock Promises Robust Returns originally appeared on Fool.com.
Kiran Gulati has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Kiran is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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