In a new report on Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA), Bernstein Research has outlined four good reasons to buy Teva's share. The report is headlined four under-appreciated catalysts and gives Teva an Outperform and gives Teva's share a target price of $58-60 in 2010.
The share closed at $51.52 on Nasdaq on Friday, giving a market cap of $45.03 billion. The share rose 0.1% on the TASE today to NIS 191.60.
The four reasons to buy Teva according to Bernstein Research are: multiple-sclerosis treatment Copaxone; Teva's specialty portfolio; the company's Paragraph IV FDA new drug applications; and another impending acquisition of a large pharmaceutical company.
Bernstein Research notes that, "Copaxone will likely take a substantial price increase. Most analysts (including us) take a conservative approach and model mid-high single digit price hikes on Copaxone each year. This is despite recent history showing ABCR drug prices increased 16% per annum. We believe odds for substantial price hikes are high - as each 1% Copaxone price hike equals $0.1.5 EPS for Teva, the cumulative impact is $0.13."
On Teva's specialty portfolio Bernstein Research reports that the company now "has 10 unaccounted phase III products. This portfolio is the logical start of what Teva hopes to build into 'specialty pharma with generic investment' business. Included are Barr's TVR products, reformulation of Qvar for allergy, partnered venture capital drugs Debrase (MediWound Ltd.), DiaPep277 (Andromeda Biotechnology Ltd.), Neulasta follow-on (a chemotherapy treatment by Amgen Inc (Nasdaq: AMGN) ) and a testosterone gel. The current value of the portfolio is $775 million (risk adjusted), which is largely not in models and can drive incremental EPS $0.45 by 2015."
On Teva's paragraph IV portfolio Bernstein Research says, "We think of Teva's earnings as a range determined by Paragraph IV opportunities. While conservative modeling of these opportunities is appropriate, it now appears overly so. After incorporating changes as described below, we model $4.61 in EPS in 2010, with a range of $4.41-$5.92; for 2011 we model $4.43 with range of $4.13-$5.39 (consensus at $4.46 and $4.79 respectively). The big swing factors include the longevity of limited competition on Adderall XR, Pulmicort, Lotrel and monetization of Hyzaar/Cozaar, Gemzar and Prevacid Solutab.
Bernstein Research also sees another major acquisition on the horizon for the pharmaceutical firm. "Teva discussed its interest in purchasing a specialty pharma business, but in recent comments suggested an acquisition is not certain or imminent. We think Teva is likely to make an acquisition but will not be surprised if it is in the generic space. As Teva is well-experienced in generic acquisition, we suspect the acquisition will be accepted favorably by the Street (the reception to branded acquisition would depend on company and price paid).
In conclusion Bernstein Research said, "In our view it is a good acquisition below $50, as we expect the company can justify $58-$60 in 2010."
Published by Globes [online], Israel business news - www.globes-online.com - on October 11, 2009
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