The ETF Innovators [ETFI] Global Healthcare Cost Containment Index profiled in the accompanying table is updated and expanded to include more companies from my recent Analysis of Generic Drug Companies from India . The index is structured to include companies with market caps between $150M-$60B, which are involved in producing generic healthcare products such as generic drugs and pharmacy benefit managers which do not have retail store and insurance components.
The Top 10 Rated companies are sorted by market cap, with Taro Pharma (TAROF) involved in litigation with India's top generic drug company by market cap, Sun Pharma (524715), to fend off a tender offer which Taro claims undervalues the company. Momenta Pharma (MNTA) and Novartis (NVS) expect to launch a generic version (M-Enoxaparin) of the injectable blood thinner Lovenox in 2009, pending approval of their ANDA by the Generic Division of the FDA, and Momenta represents a pure play on the future of biogenerics for those who believe legislation could come next year to ease the path for lower cost, generic equivalents to biotech products – including the CEO of MedcoHealth Solutions (MHS).
The market cap leaders for generic versions of prescription and over-the-counter drug products are also included in the Top 10, Teva Pharma (TEVA) and Perrigo (PRGO), respectively. A generic drug company which is expected to resume trading again shortly is Impax Labs (formerly IPXL), which had net cash of $73M and trailing 12-month GAAP sales of $309M as of 2Q08, according to a recent presentation available at their website .
Impax Labs follows the business model of Teva Pharma as it also has a proprietary division focused on new product development with one IND filed to begin clinical studies, one compound in Phase 3 clinical development, and four compounds in the exploratory stage. On the generic side, the Company offers 79 marketed products, 24 pending generic applications at the FDA (ANDAs), and 53 products under development (with over 50% of these representing potential first-to-file opportunities) – all focusing on specialty areas with limited competition which may involve controlled-release formulations or require technical expertise to manufacture.
The Top 30 Rated Healthcare Cost Containment companies outpaced benchmark healthcare ETFs over the past year with a loss of just 2.7%, compared to losses of about 30% each for the Healthcare Sector SPDR (XLV) and iShares S&P Global Healthcare (IXJ), 18% for PowerShares Dynamic Pharma (PJP), 28% for Pharma HOLDRs, and 22% for iShares Dow Jones U.S. Pharma (IHE).
With the announcement earlier today that the four remaining HealthShares funds will be closing, there is clearly a shift in the ETF industry away from niche products which are too narrowly focused. The Global Healthcare Cost Containment Index is structured to expand on a narrow index (generic prescription drugs) and include PBMs such as SXC Health Solutions (SXCI) and Express Scripts (ESRX), consumer healthcare product companies such as Perrigo, and India-based generic drug formulation and ingredient suppliers for a much broader group of companies, in addition to a wider market cap range than the $100M-$15B for HealthShares.
$34.39 (11/27/08)
