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Despite Department Of Justice Investigation, Now May Be The Time To Buy Generic Drug Stocks

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Despite Department Of Justice Investigation, Now May Be The Time To Buy Generic Drug Stocks
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Public outrage is nothing new for the pharmaceutical industry this year. Between the criticism over Turing, and later Mylan, drug price hikes are clearly a pressure point in the American zeitgeist.

On Thursday, it was revealed that U.S. prosecutors were set to file charges in December following a two-year antitrust investigation. The inquiry, which probed into collusion between executives of separate firms to raise drug prices, touched more than a dozen separate companies and over two-dozen drugs, according to Bloomberg.

This investigation looming over the generic drug industry is putting some downward pressure on generic drug stocks, and that could present a buying opportunity according to Tracey Ryniec, a stock strategist with Zacks Investment Research.

Ryniec, who appeared on Friday's PreMarket Prep show, outlined that while she remains cautious overall on the sector for now, she's very intrigued by how cheap some of these stocks have become.

"Some are really really cheap right now, so I'm keeping a couple on my watchlist. There's about 12 names you could be in that are all getting hit," she said, noting that some of these stocks are only trading at four or five times earnings. "So these are some of the cheapest stocks in the entire stock market."

Ryniec said she's sitting on the sidelines for now, especially since it remains unclear which of the companies will have charges brought against them and the form that the charges will even take.

Among the drugs experiencing a reaction to market uncertainty following the announcement Thursday were Lannet Company, Inc. (NYSE: LCI) (fell 26.6 Percent), Endo International plc (NASDAQ: ENDP) (fell 19.5 Percent), Impax Laboratories Inc. (NASDAQ: IPXL) (fell 19.5 Percent), Akorn, Inc. (NASDAQ: AKRX) (fell 18 Percent), Mylan Inc. (NASDAQ: MYL) and Teva Pharmaceutical Industries Ltd (NASDAQ: TEVA) (both fell 6 to 10 Percent).

"Everybody is acting like suddenly they're not going to be making generic drugs anymore, which is not the case," she said. "These are the cheapest I've ever seen."

Listen to the full interview with Tracey Ryniec at 34:36 in the clip below.

PreMarket Prep is a daily trading ideas show that focuses on technical analysis and actionable short term trades. You can listen to the show live every morning from 8-9 a.m. ET here, or catch the podcast here.

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