In a report on a meeting with Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) management, William Blair & Co. analysts Richard Watson and Jim Parisi say that they came away with greater confidence that the negative market reaction to Teva's first quarter results was overdone.
"We believe Teva's franchise remains strong and capable of delivering 15% to 20% long-term EPS growth," Watson and Parisi write.
"Contrary to concerns that US generic price erosion may be accelerating, consistent with our research, management does not a see a material negative shift and did not rule out the possibility it could stabilize or even improve as new generic-product opportunities begin to accelerate in mid-2006," they continue.
"Teva stock trades at 20 times the consensus 2006 EPS estimate of $1.90, roughly in line with the group multiple and toward the low end of the company's historical range. Given the strength of Teva's industry-leading franchise, we believe shares deserve a premium valuation and therefore view current valuation as attractive."
Watson and Parisi rate Teva "Outperform".
Lehman Brothers meanwhile has issued a note on the impact of yesterday's announcement that the US Food and Drug Administration had approved Teva's Parkinson's Disease treatment Azilect.
"The addition of Azilect to Teva's proprietary product line will provide another long-term source of sustainable earnings and help diversify its business. We expect Azilect to contribute to Teva's bottom line within the next year," the report by Lehman Brothers analyst Richard Silver says.
"A superior clinical profile coupled with Teva Neurosciene's marketing prowess will help ensure its success, in our view.
"Azilect represents an attractive commercial opportunity that will likely enhance Teva's already strong neurology franchise, resulting in potential synergies with Teva's Copaxone.
"We currently forecast US Azilect end-product sales of $25 million 2006 and $91 million in 2007."
Silver rates Teva "Overweight", with a target price of $47. This compares with a closing stock price in New York yesterday of $38.20.
Published by Globes [online], Israel business news - www.globes.co.il - on May 18, 2006
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