Barclays, Credit Suisse: New Teva CEO bodes more acquisitions

Both banks note that Dr. Jeremy Levin was instrumental in executing Bristol-Myers Squibb's successful string of pearls strategy.

Credit Suisse and Barclays Capital both believe that the appointment of Dr. Jeremy Levin as the next president and CEO of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) indicates that more acquisitions of brand pharmaceutical companies are on the way.

Credit Suisse says, "One of the most obvious inferences from the selection of Dr. Levin is that Teva is seeking to do more branded pharma deals. Another possibility is that Teva is seeking someone to lead the company through a strategic redeployment of its product pipeline and portfolio, as the companys branded pharma footprint evolves beyond the Cephalon acquisition and the decline of Copaxone." It noted, "Dr. Levin was instrumental in executing Bristol-Myers Squibb Inc's (NYSE: BMY) successful string of pearls strategy." This included split-off of Mead Johnson and sale of Convatec, and the acquisitions of Medarex and Zymogenetics.

Barclays says that the appointment of Dr Jeremy Levin to succeed Shlomo Yanai should help build investor confidence in the company's efforts to build its brand business. "We believe that Levin is a good choice for the job. His appointment clearly signals that Teva will remain acquisitive in building its brand business but at appropriate scale since Levin will likely attempt to recreate his "string of pearls" success. Indeed, this should alleviate investor concerns that Teva would make additional large acquisitions in order to achieve its 2015 guidance targets. In particular, we believe Levin will drive acquisitions in oncology, which has been a focus for Teva business development for some time, including the Cephalon acquisition. We believe Teva views oncology as having strategic importance since it will be a key market for biosimilars and is a market that doesn't require a large field force to promote products."

Barclays notes however, that Yanai's departure comes just ten days after Teva announced that Dr Robert Koremans would replace Dr Gerard van Odijk as President and CEO of Teva Europe. "The departure of two senior executives within two weeks would normally be a cause for some alarm, although these moves were apparently in the works for some time since Teva named replacements from outside the company immediately. Nevertheless, the extent of turnover at the senior executive level so soon after two major acquisitions - Cephalon (October 2011) and Ratiopharm (August 2010) - should not be taken lightly. Moreover, it's natural that Levin will want to build his own team, especially in the brand business, which could lead to additional management changes over the next 12-18 months."

Credit Suisse gives Teva an "Outperform" recommendation with a target price of $60, and Barclays gives it an "Equal weight" recommendation with a target price of $42.

Teva's share price rose 4.2% in early trading on Nasdaq today to $42.06, giving a market cap of $36 billion, after rising less than 0.1% on the TASE to NIS 160.70.

Published by Globes [online], Israel business news - www.globes-online.com - on January 3, 2012

Copyright of Globes Publisher Itonut (1983) Ltd. 2012

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