Teva Pharmaceutical Industries Ltd.’s (Nasdaq: TEVA; TASE: TEVA) launch of generic Zocor on June 23 has broken records and set a historic milestone. This is because Zocor is the largest drug for which the patent has expired to date. There has never before been a launch of an original or generic drug for which the ethical drug had $5 billion in sales.
According to IMS Health Global Services, Teva has won 55% of new prescriptions and 50% of all prescriptions for Zocor for the week ending July 14. Teva has a 77% market share for new prescriptions and 72% of total prescriptions for Simvastatine (generic Zocor). Dr. Reddy’s Laboratories Ltd (NYSE: RDY; BSE: 500124), which markets the authorized generic version of Zocor with Merck & Co. (NYSE: MRK), has the other 28%. Merck held the patent to original Zocor, which expired in June.
What to analysts think about these results? What is the effect on Teva? Citigroup Global Markets analysts Robert Bonte-Friedheim and Andrew Swanson said, “Initial prescription data suggests Teva is on track to meet our forecasts of $274 million Simvastatine sales in 2006, and net earning per share of $0.17.” ($133 million.) The analysts add, “Zocor’s patent expiration is shaping up to be one of the fastest genetic switches in history.” Citigroup kept its “Buy” recommendation for Teva with a target price of $46.
Lehman Brothers analyst Richard Silver is even more positive than his colleagues at Citigroup, and raised his forecast for Teva as a result of its marketing exclusivity for generic Zocor and the successful launch. He predicts that Teva will post earnings per share of $0.44 for the second quarter ($343 million), $0.06 more than in his previous forecast. He predicts that the company will post earnings per share of $2.07 for 2006 as a whole ($1.6 billion), up from his previous forecast of $1.98. Silver added that the revised forecasts could turn out to be conservative.
Lehman Brothers also concluded that Teva would raise its guidance for the rest of the year. Teva’s current guidance for 2006 predicts earnings per share of $1.82-1.90, of which $0.20-0.25 will come from generic Zocor sales. Silver believes that this guidance is low and should be changed, and predicts that Teva’s generic Zocor sales will reach $375 million in 2006.
Silver says, “Regardless of the strength of the second quarter earnings report, we do not expect it to be a major stock catalyst. Instead, we see much more focus on the 2007+ outlook, which is something we will likely have to wait another quarter to gain additional clarity from management.” Teva will publish its financial report for the second quarter on August 8.
Lehman Brothers has kept its target price of $47 for Teva, 55% above the current price on Nasdaq.
Published by Globes [online], Israel business news - www.globes.co.il - on July 25, 2006
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