http://www.peridotcapitalist.com/2008/01/select-list-released-sneak-peak-below.html Stock market and investing blog published by Chad Brand, Founder/President of Peridot Capital Sat, 11 Feb 2012 23:26:23 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://www.peridotcapitalist.com/2008/01/select-list-released-sneak-peak-below.html/comment-page-1#comment-795 Anonymous Mon, 07 Jan 2008 20:18:00 +0000 http://www.peridotcapitalist.com/?p=535#comment-795 True that generics carry higher margins than branded drugs. But also keep in mind that >90% of prescription drugs are paid for by third parties (Medicare Part D, private health insurers etc.) These 3rd party payers are looking at those gross margins on generics, sometimes as high as 50-70%, and thinking that's an easy place to cut fat by squeezing the pharmacy chains and generic makers on reimbursements. And wait until the politicians or a new Democrat president takes aim. About 2/3 of the drug chains revenues come from the pharmacy counter (at least that's the figure at Walgreen's). That's a big chunk of revenues with a big target on it. WalMart is also taking aim. Despite the pounding, I'd say the drug chains are about fairly valued now based on future cash flows, maybe slightly undervalued - I peg WAG at worth $38, not sure which stock is on your select list. If you wait, I believe you can get them cheaper. True that generics carry higher margins than branded drugs. But also keep in mind that >90% of prescription drugs are paid for by third parties (Medicare Part D, private health insurers etc.) These 3rd party payers are looking at those gross margins on generics, sometimes as high as 50-70%, and thinking that’s an easy place to cut fat by squeezing the pharmacy chains and generic makers on reimbursements. And wait until the politicians or a new Democrat president takes aim. About 2/3 of the drug chains revenues come from the pharmacy counter (at least that’s the figure at Walgreen’s). That’s a big chunk of revenues with a big target on it. WalMart is also taking aim. Despite the pounding, I’d say the drug chains are about fairly valued now based on future cash flows, maybe slightly undervalued – I peg WAG at worth $38, not sure which stock is on your select list. If you wait, I believe you can get them cheaper.

]]>