The Rest of those “Extra Paychecks” from Leeb’s “MCR Plan”

by Travis Johnson, Stock Gumshoe | November 5, 2012 2:34 pm

As promised, we’re following up with the rest of the picks that Stephen Leeb[1] (sorry, Dr. Stephen Leeb) is pitching as his “MCR” Plan.

If you missed our first entry as we began demystifying this particular ad, you can see it here — the short version is, he’s touting dividend paying stocks in the medical business, mostly pharmaceutical companies. The “MCR,” which they, of course, made up to be a mysterious-sounding term, stands for Medical Capital Returns, and there’s a lot of hoop-de-doo about it, but basically it’s just about cashing your dividend checks.

The first one he teased was Eli Lilly (LLY)[2], the second one was Merck (MRK)[3], so let’s see who else he has for us.

“MCR Component # 3

“Put Your Dollars At the Forefront of Cancer[4] Research

“MCR3 allows you to be rewarded for the fight against America’s most dreaded disease – cancer. This company just received approval for a new cancer treatment.

“In 2009, a similar company in the cancer treatment sector made a major announcement and leapt by 65% in a single day….

“… they invented their own approach to medicine, called Precision Medicine, which has put them out in front when it comes to medical innovation.

“This has allowed them to create the first new drug approved by the FDA[5] for lung cancer[6] in 6 years.

“This is not the only cancer treatment they’re bringing to market.

“There were 5 drug approvals within the last year. One of these is a treatment for pancreatic cancer, the disease that overcame Steve Jobs[7].

“This stock is another favorite of George Soros[8], due in part to the $15 billion they returned to shareholders.”

Well, high cash return to shareholders, new lung cancer drug, pancreatic cancer treatment approved recently all adds up to perhaps the first pharmaceutical company most Americans would name — this must be Pfizer (PFE)[9]. And yes, they have their own “approach” that they call Precision Medicine.

The stock is down slightly over the last couple weeks, but, like most big dividend-paying stocks outside of the tech sector, it’s up quite huge over the past year or so. Still reasonably valued, still facing patent cliff issues (though they’ve gotten past the worst of it with Lipitor[10], the story that has followed Pfizer for more than five years as they feared and prepped for losing the most profitable drug in the history of mankind), still huge and still has a yield of about 3.5%. And you can find a thousand opinions on Pfizer, I don’t have any thing particularly illuminating to see about them — analysts think they’re trading for about 10X next year’s earnings and, like most big drug companies, they think earnings will grow very slowly for the next five years.

Next?

“MCR Component # 4

“Secretive ‘String of Pearls’ Initiative

“MCR4, which boasts an industry-best 39.5% shareholder return, has just launched its ‘String of Pearls’ initiative.

“Though details are hard to come by, the word on the street is that this initiative involves a new approach to bringing drugs to market. Fast.

“This company has just received approval for a drug to treat inoperable skin cancer. It boasts, “’Unprecedented improvement in survival for many patients with metastatic melanoma. That in itself is a landmark.’…

“They also have up their sleeves a stroke medication that is far superior to the old standby. It’s already been approved in Europe. The FDA could approve it any day now, and when they do, this drug could become the new prescription of choice….that’s not the only potential use for this drug… and the more uses a drug has, the more sales.

“Studies show it is better than aspirin for patients with atrial fibrillation[11]. In short, if all the people taking aspirin for heart health suddenly start taking this drug, sales will go through the roof….

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“… sitting on a 6.2 billion dollar war chest….”

Well, I don’t know where they get the $6.2 million war chest, because that’s not a match, but the quote is from a scientist studying Yervoy (ipilimumab), which is indeed that groundbreaking new skin cancer drug. And they do have a stroke drug approved in Europe and on track for approval in the US. So this must be Bristol-Myers Squibb (BMY)[12]. Again, huge company, slow growth expected, good dividend (a bit over 4% this time), another mega-pharma in a business where all the companies blend together (at least for me).

One more?

“MCR Component # 5

“Serious Swiss Bank Accounts Start at $1,000,000…

“… But you can open an MCR Plan account for under $200. And they’ll even pay you to do so.

“It’s not a bank, per se, but it will pay you to be part of the team.

“With 25 dividend increases, 25 years in a row, this is a company that takes “well-managed” to a new level of predictability.

“They also have a secret weapon in the treatment of mental illness. Known as RG1678, this drug works by affecting the neurotransmitter glutamate.

“MSN Money reports that pharmapsychologists view this approach as the Holy Grail of treating schizophrenia.

“By now you know that drugs that get this kind of press can cause great run-ups in the stock price.

“Named by the Dow Jones Sustainability Indexes as a Supersector Leader in Healthcare for the third year in a row, this company is not only stable, it has the resources to be environmentally responsible.

“The sheer size and dominance of this company, with its leading position in cancer treatment, makes it an obvious core position in any portfolio.”

This one, friends, is another gigantor beast of a company, Roche (RHHBY on the pink sheets, they trade primarily in Switzerland)

You may be as familiar with their now wholly owned division, Genentech[13], which used to be a high flier in the biotech boom on the strength of their cancer drugs (Avastin, et al) and had the fabulous ticker DNA, but Roche and Novartis (NVS)[14] are the Swiss wing of the global pharmaceutical business and they’re both around $150 billion in market cap. They have NOT, in fact, raised their dividend for 25 years in a row, as implied, but they have paid good dividends[15] every year for many years and the schizophrenia drug RG1678 is theirs, so I don’t see how the tease could refer to anyone else. They’re shooting for a 2014 filing for approval for that one.

Roche is one of the drug companies with a truly massive pipeline, though lots of the compounds are in early stages — you can browse it here but it’s quite overwhelming[16].

So that’s our quick catch-up for the day — any thoughts on these or other big dividend paying pharma stocks? Let us know with a comment below.

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