Healthcare Business

3 Irish Specialty Pharmaceutical Stocks to Buy After Tax Inversion Implosion

For now, while the benefit for American corporations to buy or merge and move overseas may be over, as evidenced by AbbVie cancelling its merger with Shire Pharmaceutical, that doesn’t mean that consolidation within the industry is through.

A new research report from Merrill Lynch features three top companies, dubbed the “Irish 3-Pack,” as being in a far better position than U.S.-domiciled companies to pursue transactions that could leverage their tax efficient structures, which could provide upside to the Merrill Lynch standalone thesis for each.

All three stocks in the Irish 3-Pack are rated Buy at Merrill Lynch.

Actavis PLC (NYSE: ACT) is a top generic-drug maker and continues to see unprecedented growth. A key element to its growth has been the so-called patent cliff, a period when many of the world’s best-selling drugs lose patent protection. In fact, Actavis has specifically mentioned in the past the new generic introduction of drugs such as Suboxone, Lidoderm and Concerta as growth drivers. The Merrill Lynch team thinks this Irish-domiciled company could have earnings per share as high as $20 by 2017.

The Merrill Lynch price target for the stock is $254. The Thomson/First Call consensus target is higher at $267.52. Shares closed Tuesday at $232.13.

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Mallinckrodt PLC‘s (NYSE: MNK) purchase of Cadence Pharmaceuticals earlier this year is expected to remain accretive, although the firm was put through the wringer for what some thought was overpaying. Now, as the company finishes up its most recent merger and acquisition with Questcor Pharmaceuticals, it will once again be digesting yet another large acquisition. During the Mallinckrodt’s recent analyst day, it gave guidance for 2015 that was ahead of current Wall Street expectations. It also indicated that continued mergers and acquisitions remain a part of the corporate strategy.

The Merrill Lynch target price is $100, and the consensus is right in line at $101.46. The stock closed Tuesday at $89.30.

Perrigo Company PLC (NYSE: PRGO) develops, manufactures and distributes over-the-counter and generic prescription pharmaceuticals, nutritional products and active pharmaceutical ingredients, and it receives royalties from multiple sclerosis drug Tysabri. The company is the world’s largest manufacturer of over-the-counter health care products for the store brand market and an industry leader in pharmaceutical technologies. The Merrill Lynch analysts feel that it remains well positioned in store brands and in its generic niche. The earnings model the analysts are using assumes monetization of the Tysabri royalty stream at the end of fiscal year 2015 (which may or may not happen)

Perrigo investors receive a tiny 0.3% dividend. Merrill Lynch has a $172 price target, while the consensus target is set at $170.07. Perrigo closed Tuesday at $150.16 a share.

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Not only are these outstanding stocks to own in growth portfolios, they still may be merger candidates, or can do just fine on a standalone basis, with overall less tax burdens as a whole.