Should You Forget Teva Pharmaceutical and Buy These Unstoppable Stocks Instead?

• Shares of Teva -- a generic-drug shaper with a past of losses and precocious leverage -- person rallied strongly.

• Pfizer and Merck, which marque branded drugs, are financially beardown and are rebuilding their cause pipelines.

• 10 stocks we similar amended than Teva Pharmaceutical Industries ›

Shares of Teva Pharmaceutical Industries (NYSE: TEVA) rallied aft it reported net connected Nov. 5. The banal is present higher by a whopping 45% successful astir a month. The institution reported beardown results, and it appears that the concern is good positioned.

However, aft specified a ample terms advance, you whitethorn beryllium amended disconnected looking astatine 2 still-struggling makers of branded drugs instead. Here's why.

Teva's large concern is selling generic drugs. Essentially, it's the contention for makers of branded drugs erstwhile their patented medications suffer patent protection. Teva and its peers are what origin the patent cliffs that branded-drug companies are perpetually trying to negociate around.

It's not a atrocious concern to beryllium in, and Teva is simply a person successful the industry. In summation to its generic drugs, the institution has been processing its ain branded products. It has besides been focusing connected more-complex-to-produce generics arsenic a means of differentiating itself from its generic peers. When it reported third-quarter earnings, Teva bushed Wall Street expectations connected some the apical and bottommost lines of its income statement.

The stock's 45% rally pursuing the net merchandise shows that investors are excited astir Teva's future. However, it besides prices successful a batch of bully quality successful a precise abbreviated play of time. There are inactive immoderate concerns to address, including the company's important indebtedness load, a past of operating losses, and the information that it hasn't paid a dividend successful years.

While Teva produces what are fundamentally knockoffs, Pfizer (NYSE: PFE) and Merck (NYSE: MRK) manufacture originals. They some person agelong histories of occurrence successful this area, contempt the aggravated contention and highly method quality of the pharmaceutical industry. They are some facing patent cliffs successful the coming years, which makes investors interest astir their aboriginal prospects.

However, some are financially beardown companies, with materially little leverage than Teva, arsenic the illustration supra highlights. Moreover, some person consistently been profitable, portion Teva has a past of losses, arsenic the illustration beneath shows:

The beardown profits that Pfizer and Merck bask alteration them to put successful caller drugs to regenerate those that are losing patent protection.