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Dear Mr. Berko:

Dear N.F.:

I used to be a drug company aficionado and believed these companies were mankind’s savior and could do no wrong. Well, Jim Dandy and cotton candy, I was wrong as sin.

For reasons I can’t discuss now, I volunteered to spend three hours a night, three nights a week for four weeks watching a 52-inch high-definition television. I was incredulous at the number of commercials devoted to hundreds of medical conditions that I never knew existed. And then it dawned on me that the drug companies were cleverly toilet training J.Q. Public into becoming a hypochondriac, then offering pills for myriad “ouches” that our parents either took for granted or prescribed themselves an aspirin for.

Then I understood why the cost of a month’s supply of drugs for many seniors exceeds the monthly payments on their homes – Big Pharma spends hundreds of millions of dollars designing those commercials, then billions of dollars for TV time. The price of those sweet little pills, which might be a dime a pop, zooms to $2 or $3 a swallow. That’s turnpike thievery. My respect for that industry has fallen below sea level.

However, Teva Pharmaceutical Industries Ltd. (TEVA-$41.91), based in Israel, might not be as evil as those big boys who use Madison Avenue to advertise their panacea of pills to the public. Teva, which is in the process of acquiring Barr Pharmaceuticals Inc., will become the largest generic player in the world. This merger strengthens Teva’s U.S. presence as well as its presence in key markets across Europe. It also expands Teva’s pipeline to more than 500 drugs on the market and increases the number of generic drug applications waiting for Food and Drug Administration approval to more than 200.

Revenues of this generic drug company have grown from $1.8 billion in 2000 to an expected $11.3 billion in 2008. A lot of those billions derive from off-patent prescriptives, which a few years ago we bought from Big Pharma at astronomically higher prices. Teva generates about 85 percent of its revenues from North America and Europe. The company plans to double its revenues to $22 billion by entering Eastern European and Latin American markets in 2013. Teva also plans to enter the Japanese market. This is excellent timing because the Japanese government wants to increase the use of generic drugs from 17 percent of the market to 30 percent by 2012.

Earnings this year are expected to come in at $2.70 per share and several of Wall Street’s finest reckon Teva will post earnings between $3 and $3.15 in 2009. Teva has a good income statement, with operating margins of 29 percent, cash flow per share of $3.65 and net profit margins of 20.1 percent.

I think Teva is a strong buy now, and in the coming four years I believe the shares could trade between $70 and $90.

Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. © Copley News Service