How This Unique Pharma Play Keeps Winning

Over the past five years, Valeant Pharmaceuticals' stock is up 856%, absolutely smashing the returns delivered by the market. The company has recently made further waves by teaming up with activist investor Bill Ackman's Pershing Square Capital in a bid to take over Allergan , the specialty pharma company famous for Botox. 

In the following video, Motley Fool analysts Michael Douglass and Brendan Mathews discuss Valeant's unique business model. As Brendan explains, Valeant only invests a relatively small amount in research and development. According to management, the returns on investing in research simply aren't high enough in most cases. Management believes it can get a better return by purchasing proven drugs or companies with existing product portfolios. It's a lot less risky, and the returns, especially if acquisitions are made judiciously, are much higher than investing in drug development. Michael points out that this isn't a totally new strategy -- Pfizer, for instance, hasn't been shy about making acquisitions. But Valeant has definitely taken cost-cutting to the next level with its R&D reductions.

Looking for other stocks that differentiate effectively? Try this top stock for 2014.
Give me five minutes and I'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on one of the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303% over the subsequent years! Believe me, you don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

The article How This Unique Pharma Play Keeps Winning originally appeared on

Brendan Mathews owns shares of Valeant Pharmaceuticals. Michael Douglass has no position in any stocks mentioned. The Motley Fool owns and recommends shares of Valeant Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story