Many generic drug stocks have captured the attention of analysts
who believe the group is significantly undervalued despite its
buoyant earnings prospects.
Analysts point out that generics, which are copies of brand-name
drugs and sell at significant discounts, are experiencing a 15 to 20
percent average growth rate in earnings while the overall economy is
expected to expand by only 2 to 3 percent this year. Because of the
rapid earnings momentum of generics, many experts believe they
should be viewed as growth stocks and command high market multiples.
The group also has been helped by growing customer acceptance of
generic drugs, by patent expirations and by efforts to control
A.L. Laboratories of Fort Lee, N.J., is one of the
higher-quality, undervalued producers of generics, said Jerry
Treppel, a pharmaceuticals analyst for Swergold, Chefitz Inc.
With a commanding 40 percent market share of the liquid generic
drug market, A.L. Labs, through its Barre-National Inc. subsidiary,
is the nation's largest manufacturer in this sector.
Analysts note that this is the fastest-growing generic area,
helped by the increasing use of liquid medications by the elderly.
According to some analysts, A.L. Laboratories' other businesses,
including animal health and international pharmaceuticals
operations, provide a level of stability and predictability to
earnings that many generic drug companies lack.
Treppel ranks the stock as ``accumulate.'' He estimates that
A.L. Labs will earn about $1.05 a share in 1989, up almost 20
percent from 87 cents in 1988.
The stock closed unchanged Tuesday, at $16.375, on the New York
The Bolar Pharmaceuticals Co. in Copiague, N.Y., has strong
niche positions in the tablet and capsule market, enabling it to
avoid much of the pricing competition characteristic of the generic
Bolar's generic form of Dyazide, an anti-hypertension drug
produced by SmithKline Beckman, is considered crucial to Bolar's
earnings growth in 1989.
Stuart Levine, who follows Bolar for Gruntal & Co., has raised
his 1989 per-share earnings estimate for the drug maker to the $1.70
to $1.75 range. The company earned $1.51 a share in 1988.
Levine said that one reason he is looking more favorably on
Bolar is because it ``is on the road to establishing its own
proprietary products. …