S&P is bullish on Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA), saying that the company "is poised for superior growth" and giving it a "Strong buy" recommendation with a target price of $75.
Teva's share price fell 2.3% on Nasdaq yesterday to $52.08, giving a market cap of $48.5 billion, and fell 1.4% by early afternoon on the TASE today to NIS 202.40.
Teva's share price has fallen 18% on Nasdaq since the beginning of March. Most of the 20 Wall Street analysts covering the company give it "Buy", "Strong buy", or "Market outperform" recommendations, and the median target price is $70.50.
In its "Focus Stock of the Week", S&P analyst Herman Saftlas says that Teva is "the premier player in the global generic pharmaceutical industry" and that it "is uniquely positioned to capitalize on the significant growth that is forecast for this market over the coming years." He adds, "Key growth drivers for this market, in our opinion, include a wealth of new generic product opportunities resulting from an unprecedented period of patent expirations on branded blockbuster drugs; and potential volume gains stemming from efforts by government and private third-party payers to encourage greater usage of inexpensive generics in order to constrain rising health care costs."
Saftlas says, "Teva has what we believe to be the broadest generic product line and most extensive generic pipeline in the US, as well as leading positions in many other generic markets around the world. According to IMS Health, Teva ranked as the largest pharmaceutical company in the US in 2009 on a total prescription basis, commanding a 16% share of all branded and generic drug prescriptions filled. Other positives to the Teva story, in our view, include the company's low-cost manufacturing position, enhanced by vertical integration through its in-house active pharmaceutical ingredients (API) business, and a broad array of production technologies and economies of scale. We also see significant potential for Teva's branded, patented pharmaceutical business, whose flagship product is Copaxone, a treatment for multiple sclerosis."
In addition, "We believe acquisitions, a key component of past growth, will also play a key role in Teva's future, with the planned purchase of Germany-based Ratiopharm expected to deliver important top- and bottom-line benefits."
Saftlas attributes the drop in Teva's share price in the past few weeks "to pricing pressures in Europe, weakness in the euro and concerns over Protonix litigation, and FDA-cited problems at the company’s Irvine, California plant." He adds, "However, we believe all of these issues are manageable, and we expect Teva to deliver on its ambitious short and long-term performance goals."
Saftlas says that Teva's valuation is compelling, with its shares trading at about 12X our 2010 operating earning per share estimate of $4.60, below current peer multiples, and near the low end of its historical P/E range.
Published by Globes [online], Israel business news - www.globes-online.com - on June 8, 2010
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