Merrill Lynch today published an updated review for Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) against the backdrop of investors' rising concern about threats to the company's flagship product, Copaxone, for the treatment of multiple sclerosis. Merrill Lynch it reiterated its "Buy" recommendation for the share with a target price of $51, a 10% premium over Friday's closing price of $46.42.
Merrill Lynch analysts Gregg Gilbert, Haim Israel, and Sumant Kulkarni analyzed scenarios for Copaxone, which could adversely affect Teva's share, as well as scenarios that could create an upside move in the share.
The base scenario generic competition in the US in 2014. In this scenario, Copaxone represents $13/share of potential value for Teva, as the consensus now holds.
The downside case is a generic competitor in 2011, which would create a $4 downside risk. In the upside case, there is no generic competition through 2020, which would create a $9 of upside potential.
Merrill Lynch believes that Teva's share will continue to be volatile on news flow related to Copaxone. The analysts cite the challenge to Copaxone's patents filed in July 2008 by Momenta Pharmaceuticals Inc. (Nasdaq: MNTA) and Novartis AG (NYSE:NVS; LSE: NOV; SWX: NOVZ) generics unit Sandoz, which is in the early stages of litigation. They also cite the intention of Mylan Laboratories Inc. (NYSE: MYL) and India's Natco Pharma Ltd. (BSE: 524816) to shortly jointly file an abbreviated new drug applications (ANDA) for generic Copaxone, and add that other applications are possible.
Gilbert and Israel estimated Copaxone’s revenue and earning per share (EPS) contribution relative to Merill Lynch's revenue and EPS estimates for Teva in 2009-13. In the base and upside cases, Copaxone will contribute 15% to Teva's revenue and 35% to its EPS in 2009. The contribution will rise to 21% of revenue and 51% of EPS in 2013. In the downside case, Copaxone's contribution will fall to 14% of Teva's revenue and 32% of its EPS in 2013.
Teva's share fell 0.6% to NIS 191.40 by midday on the TASE today.
Merrill Lynch is now a wholly-owned subsidiary of Bank of America Corporation (NYSE: BAC)
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2009
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