3 Pharma Companies With Minimal Debt To Consider At The Current Levels

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Includes: ANTH, MRK, VRTX
by: Matt Schilling

Following what would be a second landmark decision by the FDA with regard to the weight-loss pill being developed by Vivus, Inc. (NASDAQ:VVUS), drug companies have been a hot topic as of late. That being said I wanted to find several less riskier pharmaceutical plays.

After developing a screen, I found three pharmaceutical companies that actually carry very minimal total debt-to-total cash ratios. That ratio is simply formulated by taking the company's debt and dividing by the total cash. I consider any ratio under "1" very healthy, under "2" satisfactory, under "3" cautionary, and anything over "3" a warning sign.

Symbol

Price

Mkt Cap

Total Debt

Total Cash

Ratio

CBST

39.01

2.47 B

462.07 M

790.16 M

0.585

VRTX

54.16

11.43 B

400.00 M

980.87 M

0.408

ANTH

0.71

29.23 M

24.48 M

44.03 M

0.556

Click to enlarge

Cubist Pharmaceuticals, which trades in a 52-week range of $28.82/share (52-week low) and $44.95/share (52-week high), has a market cap of $2.47 billion, was given a rating of a "1," based on the statistical calculations of my formula.

Cubist currently has $790.16 million in total cash on its books (it should be noted that the company currently has $191.01 million in operating cash flow, and $102.66 million in free cash flow) and only has $462.07 million in total debt. That equates to a total debt to total cash ratio of 0.585, which in my opinion, is a very positive catalyst moving forward.

Trading at a 5.27% discount to its 200-day moving average, Cubist recently filed a lawsuit against Hospira, Inc. (NYSE:HSP), noting the infringement of a patent with regard to the company's drug Cubicin.

Vertex Pharmaceuticals, which trades in a 52-week range of $26.50/share (52-week low) and $66.10/share (52-week high), has a market cap of $11.43 billion, was given a rating of a "1," based on the statistical calculations of my formula.

Vertex currently has $980.87 million in total cash on its books (it should be noted that the company currently has $333.28 million in operating cash flow, and $41.24 million in free cash flow) and only has $400.00 million in total debt. That equates to a total debt to total cash ratio of 0.408, which in my opinion, is a very positive catalyst moving forward.

Trading at a 21.14% premium to its 200-day moving average, Vertex was recently reiterated as a Buy by the Street.com.

Anthera Pharmaceuticals, which trades in a 52-week range of $0.60/share (52-week low) and $8.42/share (52-week high), has a market cap of $29.23 million, was given a rating of a "1," based on the statistical calculations of my formula.

Anthera currently has $44.03 million in total cash on its books (it should be noted that the company currently has -$86.50 million in operating cash flow, and -$52.68 million in free cash flow) and only has $24.48 million in total debt. That equates to a total debt to total cash ratio of 0.556, which in my opinion, is a very positive catalyst moving forward.

Trading at an 82.12% premium to its 200-day moving average, Anthera was recently downgraded to Neutral at Ascendiant Capital Markets.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.