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With Jeremy Levin now at the helm of Israel's largest pharmaceutical firm, Teva (TEVA), the stars are aligned for healthcare titan Phillip Frost to execute on his strategy of "synergistic weaving". Levin comes equipped with his executive experience at Bristol-Myers (BMY) where he implemented a "string of pearls" strategy by acquiring a series of catalysts to awake a sleeping pharmaceutical giant. Billionaire investor Frost, as the Chairman of Teva, recruited Levin. In an interview with the Jewish Chronicle, Levin explained his role in Teva:
"Every company faces a different set of challenges… Teva is a company with a unique culture… Whether [a] product is a new chemical or proven molecule, the biggest difference between a brand product and a generic is usually the price. Teva has a unique position of truly being both a brand and generic company".
In light of investor fatigue over slow momentum in generics (a point which I previously contested as "overblown"), the shift at Teva will likely mirror the shift at Bristol in several respects. One catalyst that I anticipate Teva acquiring is PROLOR Biotech (PBTH). Frost is also the Chairman of PROLOR and owns a large double-digit stake in the emerging biotech that is close to releasing the first FDA-approved long-acting version of human growth hormone. All commercially available versions of human growth hormone requires daily injections versus monthly injections for PROLOR's version, hGH-CTP. Assuming PROLOR's product is reasonably priced at $2.5K, penetrates just 3% of the market, and offers a 25% dividend yield, the value of hGH-CTP is north of $1B--a market value reinforced by Morgan Joseph's assessment.
But Levin has other Frost holdings to play with. ChromaDex (CDXC.OB), the leading provider of science-based solutions for various industries including pharmaceuticals, recently partnered with OPKO Health (OPK), another Frost-affiliated firm. Frost owns a 19% stake in ChromaDex and appears to be integrating his holdings together, if not through outright takeover activity, then through partnerships. The billionaire healthcare investor ultimately built OPKO through a series of acquisitions similar to what Levin did for Bristol.
Going forward, there are several reasons why ChromaDex would receive business from Teva and/or OPKO. First, the firm recently recruited Jeff Himmel as CEO--an executive who brings with him considerable experience in innovation. From being the visionary behind Ovaltine at Novartis to skyrocketing sales at Gold Bond, Himmel understands how to drive momentum. Second, ChromaDex's formulation of the natural compound pterostilbene found in blueberries, "pTeroPure", has been a complete grand slam. pTeroPure was named the 2010 North American Most Promising Ingredient of the Year and the line in which it is marketed, BluScience, has delivered far above expectations. It is this kind of growth story that firms like Teva and OPKO would want to tap into before the bargaining table becomes too tilted.
In closing, hGH at PROLOR is analogous to pTeroPure at ChromaDex. Both catalysts make their respective producers undervalued as commercialization kicks in (although there are other contributors). While Frost has laid the foundation for synergistic value, I am expecting Levin to ultimately be the one piecing the partnerships/acquisitions together. In the process, all four stocks (Teva, ChromaDex, OPKO, and PROLOR) are likely to outperform broader indices.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.