Thursday, June 26, 2008

Diabetes Stocks Beat Today's Market

There are nearly 133 million Americans alone considered overweight- putting them at risk for the rapidly growing Type II Diabetes. I have done a bit of research on projections as to how many Americans would be living with the disease in the future. And I have seen some scary predictions:

U.S. Centers for Disease Control and Prevention 2001 study: est. 29 million Americans affected by 2050. (Not accounting for undiagnosed diabetes)

From Diabetes Care magazine: 30.3 million Americans affected by 2030.

While I am no medical professional, I have to believe that population increases and longevity have more than a little to do with these figures. Some of the biggest increases are amongst seniors- no surprise there- elderly population is expected to double as a result of the mass amounts of retirees starting in 2011 (first “baby-boomers” turn 65).

So, today’s market was a real foreshadowing to me. Down 350+ points on the DJIA. All 30 stocks trading lower. 95% of the S&P 500 lower. And these three companies are green:

Lantus®, from France-based company Sanofi-Aventis (SNY) is the number one prescribed insulin in the United States. Their most recent quarter (Q1 2008) saw sales of 557 million for Lantus®, a 30.8% increase.

Second, there is Denmark based Novo-Nordisk (NVO), whose slogan is “changing diabetes.” Judging by the array of products and drugs they offer, I do not have any basis to disagree. Among the advertised insulin delivery products include pens like the #1 global sales leader “FlexPen®”, needles and also a specialized hypoglycemia kit for emergencies.

NVO has tremendous growth opportunities in many countries. Half of their employees are located in Denmark (12,689) but check out the host of countries they have penetrated:

North America: 3,940
Japan & Oceania: 1,025
International operations: 4,943
Europe: 3,411

Finally, DaVita (DVA) offers a different angle of treatment. The California based company operates kidney dialysis centers in the United States, serving over 100,000 people with both inpatient and outpatient options. The stock bottomed out in March and has not even come close enough to test the lows.

Here is an impressive string of analyst coverage/upgrades for DaVita:

6/3/2008 – Sun Trust Rbsn Humphrey (Initiated BUY)
4/29/2008 – Citigroup (Initiated BUY)
3/28/2008UBS (Upgrade to BUY)
3/12/2008 – Piper Jaffray (Upgrade to BUY)

…And the future is easily predictable... it will be up to companies like these to provide us with the innovation of new and effective treatments.

Disclosure: None

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