Hapoalim upgrades Teva

"The Barr acquisition puts the company in a different place."

Bank Hapoalim today upgraded its recommendation for Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) from "Market perform" to "Outperform" and raised its target price from $47 to $50. The new target is 31.5% above Teva's closing price of $42.49 on Nasdaq on Friday. The share fell 0.4% in morning trading on the TASE to NIS 164.80.

Bank Hapoalim said, "In the current economic environment, with a volatile capital market and with most companies having a limited ability to raise capital, we believe that Teva is a defensive share that must be included in any investment portfolio, beyond its market weight. The economic crisis naturally does not affect morbidity, and pharmaceutical companies will continue to profit in any market climate."

Bank Hapoalim added, "The acquisition of Barr Pharmaceuticals puts Teva in a different place from where it was before the acquisition. The foothold in the large field of women's health, in addition to Barr's strong geographical deployment, create a pharmaceutical company with a balanced and diversified business model with vertical integration and a relative advantage over competitors fighting in a competitive market."

Bank Hapoalim said that the difficult economic conditions and uncertainty in the West in general, and in the US in particular, would probably force governments to choose the cheapest alternative for financing drugs. Teva, as a generics drug company, should benefit from this trend. Barack Obama's inauguration as US president tomorrow is expected to boost the generics industry. In addition, there is already pending legislation in the US and Europe for biogenerics.

Bank Hapoalim says that another reason for investing in Teva is the company’s proprietary drugs, including Copaxone, Azilect, and pulmonary products. Although these amount to only a fraction of the company's revenue, they generate a major part of its profit.

Bank Hapoalim notes that Teva's proprietary products already account for over 20% of the company's sales. Economies of scale for these and other products, and its market strength, enable the company to win market share in very profitable segments.

The bank predicts that Copaxone sales will total $2.15 billion in 2008 and $2.5 billion in 2009, Azilect sales are predicted to total $170 million in 2009, and pulmonary product sales $700 million.

Published by Globes [online], Israel business news - www.globes-online.com - on January 19, 2009

© Copyright of Globes Publisher Itonut (1983) Ltd. 2009

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