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Senior Options Trading Strategist at Optionity, MBA. Our trading approach starts with the fundamentals, then through short-term technical analysis, to finally leverage options trading (with the combination of long and short positions) to achieve favorable risk and reward ratio trading plays. Our... More
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  • Stem-Cell Therapy, Tomorrow's Hope Maybe Coming Soon For Teva Pharmaceutical 0 comments
    Dec 26, 2012 7:11 PM | about stocks: TEVA

    Stem-cell therapy is an intervention strategy that introduces new adult stem cells into damaged tissue in order to treat disease or injury. Many medical researchers have high hope that stem-cell treatments have the potential to change the face of human diseases and alleviate suffering. One major pharmaceutical manufacturer is increasing its bet in the stem-cell therapy for congestive heart failure, Teva Pharmaceutical Industries (NYSE:TEVA). Stem-cell therapy may one day revolutionize the pharmaceutical and healthcare industry and it is still not too late to explore the investment opportunity in this developing field.

    What are Stem-cells?

    As reported by Rafael Castillo from Philippine Daily Inquirer, "Stem cells are actually amazing precursor cells present in the embryo of any species, and they have the remarkable potential to develop into many different cell types in the body during early life and growth." A stem-cell is "a sort of internal repair system," which divides and multiplies itself almost without limit to replenish other cells provided the person or animal is still alive. Each new stem cell produced by the division of the original stem cells has the potential either to remain a stem cell or become another type of cell with a more specialized function, such as a heart or nerve cell. Stem cells have the potential to literally replace old malfunctioning cells and make them like those of a young healthy person, as reported by Rafael Castillo.

    Promising, but Still Long Way to Go

    The stem-cell therapy sounds highly promising; however, there is still a large technical barrier to achieve its functionality without complications and a lot more tests and trials are required. As quoted from Sir Martin Evans, one of the pioneers of embryonic stem-cell and gene targeting research which earned him a Nobel Prize for medicine,

    "The scenario of a cell-based therapy or medical intervention using cells is very sound, but there is still a long way to go before it's a safe therapy. There's also quite a lot of jumping the gun and early adoption going on, some of which is quite cynical."

    Progress, Top Benefits for Mankind

    In the last few years, scientists, focusing their work on stem-cell therapy, have accomplished greater progress by switching from studying controversial embryonic stem cell benefits to adult stem cell therapy and therapies involving umbilical cord stem cell samples receive via cord blood banking process. As stated from the report from Health Articles 101,

    "According to their findings, adult stem cell therapy treatments have less chances of being rejected by a patient, therefore increasing his recovery rates. When using patient's own skin stem cells, there's no need to administer immune suppressing drugs as in instances of using embryonic stem cell therapy, which could be debilitating for the patient in the long run. In addition, adult stem cells are easier and less controversial to obtain, making this stem cell therapy a very promising medical field of research for the future."

    Top benefits of adult stem cell therapy for mankind cover the areas of:

    • Anti-aging
    • Diabetes treatment
    • Transplantology
    • Stem cell hair growth
    • Spinal cord injuries
    • Treating senile dementia and Alzheimer's
    • Growing limbs
    • Arthritis stem-cell therapy
    • Autism stem-cell therapy
    • Heart disease stem cell therapy

    Aging Population and Stem-cell Therapy

    The world is not only aging and the aging populations are also living longer. As the share of the aging population increases, the demand for social security and healthcare will increase. Stem-cell therapy offers the possibility to cure the incurables or complicated, tough diseases and enhance the living quality for the human race with increasing longevity.

    Investment Opportunity

    On December 11, Jeremy Levin, CEO of Teva Pharmaceutical Industries, affirmed on a small item on the company agenda: Teva is going ahead with a large, late-stage trial of Revascor, an experimental cell therapy for congestive heart failure. Revascor is not owned by TEVA but by a partner, small Austrian biotech Mesoblast.

    As stated from Mesoblast's website, congestive heart failure, CHF,

    "is a chronic condition characterized by an enlarged heart and insufficient blood flow to the extremities of the body. The condition develops over time and can be caused by many factors that put an excess demand on the heart muscle, including high blood pressure, incompetent valves, infections of the heart muscle or valves, or congenital heart problems. More than 6 million people in the United States suffer from heart failure with an additional 670,000 new cases diagnosed each year. This is the number one cause of mortality and hospitalization in the Western world."

    Further,

    "Mesoblast's target market is CHF patients in NYHA class II to IV with an ejection fraction of less than 35%. The estimated market size in the United States alone is currently 2.5 million patients (41% of 6.2 million pre-existing sufferers) and 201,000 newly diagnosed (30% of 670,000) each year.

    Mesoblast has developed the adult stem cell-based heart product Revascor® to treat moderate to severe congestive heart failure. In a Phase 2 trial using Revascor®, interim results showed sustained improvement in heart muscle function at six months following implantation with the proprietary stem cells compared with progressive loss in heart function seen in controls. Improvements in these endpoints are used as surrogates to predict reduced mortality and hospitalization due to heart failure."

    For investors, investing in stem-cell therapy alone may be still too risky. TEVA, however, offers a strong play in the healthcare sector with the potential to gain from success of stem-cell therapy in the field of congestive heart failure.

    Teva Pharmaceutical Industries

    TEVA is the world's largest generic pharmaceutical manufacturer with operations in 60 countries. TEVA develops, produces and markets generic drugs in all treatment categories. TEVA's global low-cost operations, expansion to emerging markets, strong generic manufacturing capabilities, and drug pipeline should enable the company to grow profitably and continuously in the long term while benefiting nicely with the aging baby boomer trend.

    TEVA currently has an enterprise value of $45.16B and a market cap of $32.0B. TEVA has a Trailing P/E of 15.40 and a Forward P/E of 7.44 with a PEG ratio of 0.87. TEVA generates ROE of 9.28% with 23.07% operating margin and 10.36% profit margin, ttm. TEVA has a total cash of $1.43B with an operating cash flow of $4.42B and a levered free cash flow of $3.65B. TEVA has a book value of $26.42. TEVA is currently trading at $37.79 and offers 2.72% dividend yield. A recent update on TEVA can also be read here.

    Note: Investors and traders are recommended to do their own due diligence and research before making any trading/investing decisions.

    Disclosure: I am long TEVA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Themes: demographics Stocks: TEVA
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