Clal Finance: Teva must greatly improve

"Although expenses are supposed to improve in the foreseeable future, Teva cannot rely on low taxes."

10 February 13 10:38, Kobi Yeshayahou

"Teva met the market's revenue forecasts, but the higher than expected operating expenses and very low tax rate offset the picture, resulting in earnings per share of $1.32, just one cent below the analysts' consensus," said Clal Finance analyst Jonathan Kreizman in response to the financial report for the fourth quarter and full year of 2012 which Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) published on Thursday.

"Although the expenses item is supposed to improve in the foreseeable future, Teva cannot rely on unlimited low taxes, and it will have to greatly improve to meet the market's expectations for the coming quarters," added Kreizman. He reiterated his "Buy" recommendation for Teva with a target price of $40. Teva's share price closed at $38.68 on the New York Stock Exchange on Friday, giving a market cap of $33.6 billion.

Teva reported stable fourth quarter results for the US, with slightly higher sales of Copaxone and other brand drugs, but fewer launches of generic drugs and lower sales. In Europe, fourth quarter sales were just 2% higher, but 13% higher compared with the preceding quarter (2012 sales were also 13% higher), partly due to higher Copaxone sales and progress in the company's OTC venture. Teva's sales in the rest of the world fell by 2%, partly due to lower sales in Canada, which were partly offset by growth in Latin America.

Teva's fourth quarter sales of Copaxone totaled $1.06 billion, below Kreizman's forecast of $1.08 billion. Copaxone sales were 14% higher compared with the corresponding quarter of 2011, mainly because Teva bought back the distribution rights in Europe from Sanofi, and also because of a 5% price hike, and larger market share in the US. These factors were partly offset by lower sales in Russia, due to the timing of tenders.

"With [Copaxone] sales stable above $1 billion, we believe that Teva will reach almost $4 billion in sales in 2013, above Teva's guidance of $3.8 billion issued in November 2012. The company said that, in the coming weeks, it will publish scientific articles indicating the risks in using generic versions of the drug," said Kreizman.

Teva reported $2.66 billion in generics sales for the fourth quarter, 11% less than for the corresponding quarter of 2011, and in line with Kreizman's forecast. He says that sales of brand drugs showed no clear trend.

Published by Globes [online], Israel business news - www.globes-online.com - on February 10, 2013

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