Renewing its coverage of the Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) share this week, Goldman-Sachs wrote, "We expect TEVA to benefit from significant synergies/savings, creating an earnings bridge to the specialty pipeline which should start to meaningfully contribute later in the decade."
Goldman-Sachs did not cover Teva in recent months because it was involved in the Teva-Mylan Pharmaceuticals deal as a consultant for Mylan. Goldman-Sachs is recommending "Neutral" for the Teva share with a target price of $80, reflecting a 15% premium on the current price in New York. Teva is paying $40.5 billion for Allergan's generic division.
Goldman-Sachs analyst Jami Rubin notes that the acquisition of the Allergan division will make Teva the number one generic player by a wide margin over all the others. Teva's sales will account for 50% of all generic sales in the US, and it will benefit from economies of scale in its relations with the insurers, distributors, and pharmacies. According to Rubin, Teva's exposure to the generic sector will grow, with the proportion of its sales accounted for by generic drugs rising from 59% at present to 71%, based on the 2016 forecasts.
"Despite the financial resources required to execute the proposed AGN generics transaction, TEVA management has described plans to continue pursuing potential deal activity in 2015 and 2016 to augment the specialty branded pipeline," Rubin wrote.
Rubin believes that Teva will be able to make another acquisition of $1 billion in 2015, and this amount will increase in 2016. Goldman-Sachs believes there is a risk that a generic version of double-dosage (40-mg) Copaxone will be launched as early as 2017.
There is already generic competition for the regular dosage of Copaxone, Teva's flagship drug for the treatment of multiple sclerosis. 70% of patients using the drug currently receive the double dosage. Rubin writes, "While Copaxone would become a smaller part of the story for a combined TEVA + AGN company, we still see risk to numbers if a generic Copaxone 40 mg launches in 1Q2017."
Rubin states, "We are especially encouraged by recent developments in TEVA’s R&D pipeline including their CGRP antibody for chronic migraine, SD-809 for Huntington’s and other CNS disorders, and reslizumab for asthma."
Nevertheless, the recommendation is neutral, not positive, which Rubin explains by writing, "We see greater relative near-term upside in other names (consolidators AGN and PFE with significant capital allocation optionality; and innovators BMY and ABBV)." According to Thomson/First Call figures, of 23 analysts covering Teva, 15 are making positive recommendations for the share, and none of the analysts surveyed has a "sell" recommendation.
Published by Globes [online], Israel business news - www.globes-online.com - on August 12, 2015
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