Two Top Overseas Drug Stocks on Sale

05/11/2009 1:00 pm EST

Focus: STOCKS

Charles Carlson

Editor, DRIP Investor

Charles Carlson, editor of the DRIP Investor, says big international drug companies are cheap and easily purchased by US investors.

The good news when it comes to international investing is that it has never been easier to buy foreign stocks directly via American Depositary Receipts—securities that trade on US exchanges that represent ownership in shares of foreign companies.

With the growth in ADRs has come an increased number of ADRs offering US investors direct-purchase plans whereby they can buy ADRs directly, the first share and every share. ADR direct-purchase plans operate much the same as their US counterparts.

AstraZeneca (NYSE: AZN), based in the United Kingdom, is a leading pharmaceutical firm. The company boasts a portfolio that includes 11 products that generate more than $1 billion each in annual sales. Top drugs include Crestor (cholesterol) and Symbicort(asthma).

Another important drug, the antipsychotic Seroquel, generated more than $4 billion in revenue last year. However, the drug is at the center of more than 9,000 lawsuits from former patients claiming it caused weight gain, high blood sugar levels, and even diabetes. The US government is also investigating the drug’s marketing.

While this issue does lend some risks to the stock, the shares, down [nearly] 30% from their 52-week high of nearly $50 per share, seem to be discounting a lot of the concerns. (They closed above $36 Friday—Editor.) The stock trades at just seven times the 2009 earnings estimate, a very low valuation for a quality drug company.

The stock carries an estimated yield of nearly 6%. These shares offer a nice combination of growth and income and are attractively priced for new buying. AstraZeneca’s direct-purchase plan is offered under the J.P. Morgan Global Invest Direct program. Minimum initial investment is $250.

Novo Nordisk (NYSE: NVO), based in Denmark, is the world’s largest diabetes-care company. Diabetes is seen by some health-care professionals to be at “epidemic” levels, with the number of people with diabetes expected to rise by one estimate to 350 million by 2025. Thus, Novo Nordisk should see continued steady demand for its products. The firm will also see increased competition as more drug makers try to capture a share of this growing market.

The stock has been weak in recent trading following disappointing regulatory news for its new liraglutidemedication. A Food and Drug Administration (FDA) panel provided a mixed recommendation on the drug. Approval of the drug could be delayed for an extended period, although the FDA is not required to follow the panel’s advice.

Still, the decline has brought these shares into a very attractive price level for patient, long-term investors. (It closed below $49 Friday—Editor.) I am a big fan of the stock and recommend these shares for any investor.

Novo Nordisk’s direct-purchase plan is offered under the J.P. Morgan Global Invest Direct program. Minimum initial investment is $250.

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