NEW YORK, NY--(Marketwire - Feb 7, 2013) - Healthcare stocks are destined to perform well, thanks to increased life expectancy and the rise of lifestyle ailments. However, the sector is not without its own set of problems. R&D is one the biggest costs incurred by the pharma companies and the process of developing drugs is long and unpredictable. While companies like Warner Chilcott are expected to take the M&A route to grow, Teva Pharmaceuticals Industries is planning to focus on new product development in-house. However, both the companies are streamlining their business processes and the stock price is likely to benefit from these steps.

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Teva Pharmaceuticals announced ending its cancer drug collaboration with CureTech. The company will take a charge of $109 million for the cessation of the contract. As one of the leading generic drug manufacturers, Teva offers a reliable investment as it offers over 2.12 percent dividend yield. However, the stock lost its value in 2012, but is likely to recover in the near future. The company is scheduled to report its fourth quarter today, and is expected to report revenue at $5.25 billion, while its EPS is likely to remain at $1.33 per share (at the time this article was completed TEVA has not yet posted its financial readings).

Teva is facing a patent cliff as its prominent revenue generator Copaxone will lose patent protection in 2015. The drug accounts for about 20 percent of Teva's revenue and the company is looking to fill the void by focusing on R&D and acquisitions. The drug maker is planning to cut its costs as its CEO has a game plan to reduce costs by $1.5 billion to $2 billion over the course of next three years. The stock currently trades at Price/Earnings ratio of 15.64 and offers a good entry point. It is also hovering around its 52-week low, which it created late last year, and thus offers good upside.

Conversely, Warner Chilcott offers 3.43 percent dividend yield and is an attractive stock for investors seeking regular income. The company is mainly invested in developing drugs for women's health. However, it faces deep challenges from generic drugs as its new products such as Lo Loestrin and Atelvia failed to perform as per expectations. The company has relatively low R&D expenses as it spends about 4 percent of its revenue on R&D efforts. Nonetheless, lack of focus on new product development may impact the firm negatively in the long-run.

Warner Chilcott is looking to expand through acquisitions as it is rumored to be in talks with Endo Health Solutions Inc. for a possible buyout. Endo specializes in developing pain medication and may help Warner Chilcott in diversifying its portfolio. However, Warner Chilcott is not the only suitor as Endo is in talks with other companies like Valeant for instance. So, only time will tell if Warner Chilcott will be able to clinch the deal or not. Although, the company has a high debt burden and its cash generation options are rather limited, it is expected to get some relief towards the latter part of the year as the company gains traction through Atelvia.

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