Beximco – Fast Growth at Cheap Prices Spur Investor Opportunity

Branded drugs worth $150 billion in global annual sales are coming off patent in the next few years. Beximco will play a role in cranking out knocks offs of those blockbuster drugs, and will make them available at prices consumers in developing markets can afford.

Beximco Pharmaceuticals (AIM: BXP) Beximco is Bangladesh’s largest exporter of pharmaceuticals, shipping a portfolio of more than 400 generic and branded-generic drugs to more than 45 countries across the developing world, mainly developing markets like Cambodia, Myanmar, Vietnam, Pakistan and others.

Though many of the inhabitants of those countries are impoverished or barely hanging onto the lowest rung of middle-class (i.e., the working poor), spending on medical care is exploding across the developing world. Along with better food and shelter, improved healthcare is one of the first expenses a family makes when it starts earning more … and it’s one of the prime budget items in countries that are using newfound commodity wealth to improve society. Drugs are a big part of the trend and, as such, Beximco is in a sweet spot.

Fast Growth at Cheap Prices Beximco’s strengths are in antibiotics and drugs to treat diabetes as well as respiratory, central nervous system and gastrointestinal disorders, among others. Competition in generics is fierce, and even in Bangladesh’s Beximco Pharma is one of several drugmakers. But it’s the largest and it’s stealing market share from rivals.

The company has been around for more than 35 years, and today operates a state-of-the-art manufacturing plant outside of Dhaka, the Bangladeshi capital. That might sound sketchy, but Beximco’s facilities have received the equivalent of the Good Housekeeping seal of approval from food and drug regulators in major markets like Australia and Austria (and Austria’s approval is recognized through the entire European Union).

Sales last year approached US$90 million, up a healthy 17% – and they should grow another 15% or so for the next several years. Indeed, Beximco has a big catalyst in the offing. Branded drugs worth $150 billion in global annual sales are coming off patent in the next few years.

Beximco will play a role in cranking out knocks offs of those blockbuster drugs, and will make them available at prices consumers in developing markets can afford. That will drive earnings. Perhaps best of all, Beximco is ridiculously cheap. The shares trade at just six times 2012 earnings and just two times cash flow. That’s cheap. It might take some time for investors to catch on to the good story that is Beximco. But they will catch on, and Beximco will soar.

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