Stocks and Sectors

Dr. Reddy’s Laboratories (RDY)

Q3 2012 Earnings Call

February 03, 2012 8:00 am ET

Executives

Kedar Upadhye – Former Director

Gunupati Venkateswara Prasad – Executive Vice Chairman, Chief Executive Officer, Member of Management Council, Chairman of Investment Committee, Member of Strategy Committee, Member of Shareholders Grievance Committee and Member of Management Committee

Umang Vohra – Chief Financial Officer, Chief Compliance officer, Senior Vice President and Member of Management Council

Kallam Satish Reddy – Managing Director, Chief Operating Officer, Executive Director, Member of the Management Council, Chairman of Management Committee, Member of Shareholders Grievance Committee, Member of Investment Committee and Member of Strategy Committee

Analysts

Ashwin Agarwal

Nimish Mehta – MP Advisors

Manoj Garg – Edelweiss Capital Ltd., Research Division

Sonal Gupta – UBS Investment Bank, Research Division

Bino Pathiparampil – IIFL Research

Nitin Agarwal – IDFC Securities Ltd., Research Division

Anubhav Aggarwal – Crédit Suisse AG, Research Division

Abhay Shanbhag

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By Kapitall:

Interested in finding stocks that may be trading below their fair value? If so, here are some ideas to get started on your search.

We ran a screen on the healthcare sector for stocks that appear undervalued relative to earnings growth, with PEG below 1, and relative to levered free cash flow, with high ratios of levered free cash flow/enterprise value.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm’s value from all ownership sources: market cap, outstanding debt, and preferred shares.

‪Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

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Do you think these stocks should be trading higher? Use this list as a starting point for

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Health Net, Inc. (HNT)

Q4 2011 Earnings Conference Call

February 3, 2012 11:00 AM ET

Executives

Angie McCabe – Vice President of Investor Relations

Jay Gellert – Chief Executive Officer

Analysts

Ana Gupte – Sanford Bernstein

Kevin Fishbeck – Bank of America Merrill Lynch

Christine Arnold – Cowen

Josh Raskin – Barclays Capital

David Windley – Jefferies

Peter Costa – Wells Fargo Securities

Carl McDonald – Citigroup

Charles Boorady – Crédit Suisse

Presentation

Operator

Good morning, and welcome to the Health Net, Incorporated Fourth Quarter and Year-End 2011 Conference Call. Today’s call is being recorded. At this time, I would like to turn the call over to Angie McCabe, Vice President of Investor Relations. Please go ahead, ma’am.

Angie McCabe

Thank you, David and thank you all for joining for a discussion of Health Net’s fourth quarter and year-end 2011 results. During this call, we will make forward-looking statements are

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By Stephen Simpson:

By and large, it’s hard to feel sorry for, or be patient with, companies where the wounds are largely self-inflicted. Still, when a company has significant market share in multiple markets of size, investors would do well to keep an eye on the story. To that end,

Carefusion (CFN) has disappointed investors recently, but the long-term potential of this company is still quite a bit more than is reflected in the stock today.

Not Many Surprises In The Second Quarter

Given that CareFusion warned about this quarter’s results, there weren’t a lot of surprises in store when the final results came out. Revenue rose a bit more than 3%, with organic revenue up a little less than 3%. Growth was led by a fine performance in Medical Systems; revenue rose more than 9% on solid growth across dispensing, infusion, and respiratory. Procedural was the problem child – sales fell 2%

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By Stephen Simpson:

It’s no secret that Big Pharma companies live and die with their pipeline and their ability to drive sales from patent-protected branded drugs. Unfortunately, these two major drivers are both working against UK-based AstraZeneca (AZN). Although current results weren’t bad and the company’s valuation looks compelling by some metrics, management has a lot of work ahead of it in refilling its pipeline and maintaining its earnings base.

An All-Around Decent Q4, For What It Matters

AstraZeneca actually reported a respectable fourth quarter. Revenue was up slightly, beating the averaged expectation of a modest decline. Revenue in the U.S. was up 5%, offsetting a 15% decline in Western Europe tied in part to generic competition for Nexium. While total Nexium sales did decline 13% this quarter, other major products like Seroquel, Crestor, and Symbicort delivered double-digit sales growth, with Seroquel especially strong relative to expectations.

AstraZeneca also did well on its

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By Bret Jensen:

I am very cautious on the market as a whole despite a solid jobs report this morning. However, given my recent gains from Warren Resources (WRES), I am ready to take a chance with another high risk/high reward stock with a $3 handle.

Vical Incoporated (VICL)

7 Reasons to buy VICL at $3.50 a share:

• Allovectin(R , its first-line therapy for patients with Stage III or IV recurrent metastatic melanoma is beginning phase III trials and could be on the market by 2013 if all goes well. The company estimates the worldwide market for this drug to be in the $500mm to $1B sales range annually. This is 2 to 4 times the company’s current market capitalization.
• Insiders seem to believe in the drug’s prospects given that there has been $10mm in new buying so far in 2012.
• The company has about 20% of its market capitalization in cash. Given

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By Stephen Simpson:

Roche (RHHBY.PK) was a good name to own throughout 2011 in large part because so little was expected from the company. Investors still looking to position their portfolio for 2012 may want to consider Merck (MRK) for similar reasons. Not only does Merck have a pretty tolerable patent cliff over the next three years, but the company’s pipeline may yet be undervalued and under-appreciated.

Q4 Results: Good Margins On So-So Sales

Merck’s fourth quarter was more or less fine. Revenue grew 2%, but came in about 2% light of average Wall Street guesses. Januvia was quite strong (revenue up 42%) and Singulair did well for a drug that is long in the tooth (up 8%), but Remicade was a little weak and the company did have to swallow a 15% drop in sales of Vytorin. Animal health and consumer sales were up 7% and 5%, respectively, but are relatively small

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Sirona Dental Systems, Inc. (SIRO)

F1Q12 Earnings Call

February 3, 2012 8:30 am ET

Executives

John Sweeney – VP, IR

Simone Blank – CFO and EVP

Jost Fischer – Chairman & CEO

Jeffrey Slovin – President and Director

Analysts

Robert Jones – Goldman Sachs Group, Increase

Brandon Couillard – Jefferies & Company

Steve Beuchaw – Morgan Stanley & Co. LLC

Jonathan Block – SunTrust Robinson Humphrey

Beth Rose – William Blair & Company

Scott Green – Bank of America Merrill Lynch

Larry Marsh – Barclays Capital

Ross Taylor – CL King & Associates

Tycho Peterson – J.P. Morgan

Jeff Johnson – Robert W. Baird & Company

Jeffrey Warshauer – Sidoti & Company, LLC