Novartis AG (NVS) is already a strong company, and it is receiving recognition for this. In addition, it is continuing to expand and has been enjoying a fairly positive news presence. There has been negative news for the company as well, but these events have been a little less significant. I think Novartis stock is in a good position, and, trading at around $56, Novartis may just be your next steal. Look for the company to grow its P/E Ratio of 15.84 and reward investors for quarters to come.
Novartis has received some slightly good press lately, but another pharmaceutical company has outshone it. The 2012 EFMD Excellence in Practice award winners have been announced, and Novartis was honored as a "highly commended case." Merck (MRK), however, actually won an award. Since the two companies are in the same industry, the achievement from Novartis will receive less notice. This does show that the company is in a fairly strong position though, so it is worthwhile to investigate other recent news events as well.
It is also paying attention to growing markets, as Novartis is currently making a push to expand its operations even further in Russia. It has a new $150 million manufacturing plant outside of St. Petersburg that it plans to complete in about two years. This is a market that will prove to be quite important for pharmaceutical companies, and Novartis is moving forward with establishing a strong presence there. This is only one part of the $500 million investment it is putting into the country. Early strength in this emerging market will certainly prove to be profitable for Novartis in the future, so investors should be quite pleased with this move.
In the United States, Novartis is becoming a more important company as well. Emergent BioSolutions (EBS), GlaxoSmithKline (GSK), and Novartis will all play a role in a $400 million contract with the U.S. government. These three companies will provide facilities that can deliver a rapid response of vaccines in the event of bioterrorism or a pandemic. This makes the companies important for the safety of the country, and it also provides them with a profitable contract. Novartis will look to add on to its cash flow (over $12 billion) and keep its wallet full.
This is not the only way that Novartis is working toward global health and safety, as it has organized an important workshop for national and international leaders in the treatment of malaria. This represents over 35 countries in Africa, and it will help address the question of how leaders can expand their efforts against Malaria even further. While this is a rather minor event in how it affects Novartis, it further adds to the good reputation it has worked to establish for itself.
Novartis also remains involved in the bidding war over Amylin Pharmaceuticals (AMLN). It is only one of five companies interested in purchasing Amylin, so this may or may not have much of an effect on Novartis stock. Final bids should be in the news soon, however, so this is an important event to watch as it develops. Amylin is a diabetes drug manufacturer, and it should be a big asset for any of the companies. The winner of this bidding war will see its stock price going up, but the other stocks should not be changing much in price. This is an event that may spell out good things for Novartis, but it is not too risky for the stock at the moment.
All is not perfect for Novartis though. Momenta Pharmaceuticals (MNTA) and Novartis recently suffered a bit of a setback, as they lost their legal battle with Teva Pharmaceutical Industries (TEVA). The two companies were attempting to market a generic version of Teva's multiple sclerosis drug Copaxone. In order to do so, Teva's patent needed to be invalidated, but the court sided with Teva. This will have a negative effect on Momenta and Novartis stock prices, even if Momenta is already planning an appeal. Other companies are disappointed by this decision as well, and this event will also have a negative effect on Mylan (MYL). On the other hand, Teva should remain strong in the industry, and its stock price should be on the rise as a result.
In terms of new medications, Novartis does have some good news as well. It has recently received a recommendation from Europe's Committee for Medicinal Products for Human Use (CHMP). This was for its chronic obstructive pulmonary disease treatment Seebri Breezhaler. The CHMP also recently granted Novartis a recommendation for Afinitor as a breast cancer therapy, so things are looking quite good for Novartis. The final decision about Seebri Breezhaler is still three months away, but this shows that it will likely be approved. These recommendations, therefore, will help Novartis combat the negative news about its generic multiple sclerosis drug.
This kind of support is putting Novartis ahead of some of its competitors, as some have had less luck with the CHMP in recent times. While Novartis and AstraZeneca (AZN) have recently received recommendations, Pfizer (PFE) has failed to receive backing for its Gaucher disease treatment Elelyso. Novartis and AstraZeneca will continue moving forward with its products, therefore, and both stocks should be doing well as a result. Pfizer, however, will be struggling more, as it is unlikely that it will receive approval in the near future. Clearly, this will have a negative effect on Pfizer's stock.
As I said, I think Novartis is still undervalued and some analysts certainly agree. The company is primed to go over its not quite $57 per share trading price, and I think it will go over its target price of nearly $60 in the next one- to two-months time frame. Get in now and stick with Novartis.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.