UBS: Teva's drug applications lead "truly remarkable"

"Copaxone patent expiration in 2014 is a looming hurdle".

In a 200 page report on the global pharmaceutical industry entitled "Good Ideas are Shaken, Not Stirred" UBS analysts give a "Buy" recommendation for Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA).

The UBS analysts gave Teva's share a target price of $52, which was 15% above its closing price of $45.39 on Nasdaq on Friday, which gave it a market cap of $40.34 billion. In afternoon trading on the TASE, Teva's share was up 2.1% at NIS 188.10.

UBS analysts gave four reasons for recommending Teva's share. They said, "We like the generics sector as a safe-haven in a global recession, as the macro tailwinds are still positive and Teva is well positioned to increase its market share in the global generics marketplace."

Secondly they added, "Teva has a very strong late-stage paragraph IV pipeline with multiple large visible opportunities that could drive strong earnings growth in 2009 and 2010. Teva now has 201 abbreviated new drug applications ($110 billion in branded sales) pending at FDA, of which 128 are Paragraph IVs, of which Teva believes it is first-to-file (FTF) on 85 products ($53 billion).

"What is truly remarkable is that of the $290 billion US pharma market, management indicated that Teva has abbreviated new drug applications (ANDA) pending that represent 38%, or $110 billion, as well as another 22% or $64 billion in development, and one-fourth of the products in development are for products that are not even on the market yet."

"For example," the UBS analysts observed, "Mylan has 119 ANDAs with 34 FTF products worth $17 billion. This is what we mean by a pipeline that is so much larger than the competition, and the lead continues to grow."

The third reason for buying Teva given by UBS was, "We have unusually good visibility into a strong 2010 (30-35% EPS growth) driven by better economics on Copaxone and the planned launch of generic Effexor ER."

" We assume that Copaxone accounted for about 30% of corporate EPS in 2008 and that it will account for about 28% in 2009 and 32% in 2010. It’s a double-edged sword, with Copaxone becoming such a significant component of incremental growth and total company profitability. The good news is that physicians now view the drug as having the best therapeutic profile with clinical data released over the past few years and thus the drug continues to gain global market share. The bad news is that the hole is getting larger to eventually fill as the patent estate expires in 2014. The company is working on many innovative products that are currently in the pipeline but get little investor attention, and we assume it will be this portfolio and its biogenerics portfolio that ultimately fill this hole.

"We believe oral therapy eventually will have an important role in the market but that concerns that it will replace current injectable therapy, especially Copaxone, are overblown."

Fourth and finally UBS said, "We like the Barr acquisition and believe integration synergies will provide earnings upside over the next few years."

Published by Globes [online], Israel business news - - on March 15, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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