Merrill Lynch and Deutsche Bank are both satisfied with the financial report for the fourth quarter and full year of 2011 that Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) published yesterday. Both banks reiterated their "Buy: recommendations for Teva, but Deutsche Bank's target price of $48 is more conservative than Merrill Lynch's raised target price of $55.
Deutsche Bank analysts David Steinberg, Edward Chung, and Aaron Mishel say that Teva delivered a "solid" report, with generic back on track. They point to the 44% growth in Teva's US generics business in the fourth quarter to $1.24 billion, compared with the preceding quarter, which they describe as the first solid performance in over a year for this business segment, which had been affected by sluggish new product flow and manufacturing issues in 2010-11. They also note the restrained 13% growth in Europe, compared with the corresponding quarter, due to the region's macroeconomic environment, but say that sales in Asia, Russia, and Latin America picked up the slack, growing 44% over the corresponding quarter, partly thanks to acquisitions in Japan.
The analysts add, "We continue to see a potential near term trading opportunity in the first half of 2012," citing a 75% chance of a favorable decision in the Copaxone court case in the second quarter; further improvement in the US generics business led by Zyprexo, the pending launch of Lexapro, and other drugs; potential strategic acquisitions; and the company's $3 billion share buyback. They caution, however, that Teva's long-term outlook remains "murky", generics will peak in 2012 as patents for brand drugs expire, challenges remain for Copaxone, and future growth drivers, such as biosimilars and new branded launches are still a number of years away.
Deutsche Bank's analysts reiterated their forecasts for Teva at $5.59 earnings per share on $21.9 billion revenue in 2012 and $5.97 earnings per share on $22.5 billion revenue in 2013.
Merrill Lynch analysts Gregg Gilbert, Haim Israel and Sumant Kulkarni raised their revenue estimates for Teva, mainly on higher sales of the company's over-the-counter and other businesses to $21.6 billion and $20.9 billion, respectively, in 2012-13. They reiterated their 2012 earnings per share estimate at $5.59, assuming a possibly over conservative assessment of generic competition to Copaxone in 2013.
"We continue to like Teva's geographic and business mix diversity and vertically-integrated model, and believe that the Street may be overly pessimistic on the size and duration of the Copaxone stream." They also like Teva's new focus on shareholder return, including its 25% dividend hike.
Published by Globes [online], Israel business news - www.globes-online.com - on February 16, 2012
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