In a first-ever survey on Teva Pharmaceutical Industries Ltd. (Nasdaq:TEVA; TASE:TEVA) entitled "Strong company but Copaxone is an overhang," Morgan Stanley Research is unenthusiastic on Teva's share price and has given the company an equal-weight stock rating.
Morgan Stanley speak enthusiastically about Teva as a company saying, "We view Teva as an exceptional company with very talented management. The generics franchise is likely to deliver strong results over the next few years as it capitalizes on a wave of product launches, consolidates the market, and generates operational efficiencies. And Teva's branded pharmaceutical operations should also be robust, with potential future acquisitions adding upside."
Nevertheless Morgan Stanley observes, "Great companies are not always great stocks (and vice versa). Although we think very highly of Teva, we do not anticipate stock outperformance given Copaxone generic uncertainty. We see risk that the FDA does not approve Teva's low-volume Copaxone application on January 1. Such action could cause investor concern because the low-volume product is supposed to help blunt the generic threat to US Copaxone."
Morgan Stanley is concerned that the FORTE data on Teva's low-volume Copaxone formulation will not be sufficient to assess its effectiveness.
Morgan Stanley also observes that Copaxone contributes 20% of Teva's revenue and feels this is disproportionate to Teva's earnings.
Following the acquisition of Ratiopharm, Morgan Stanley projects 2011 revenue of $19.1 billion for Teva, 2% above consensus.
Despite the unenthusiastic rating, Teva's share price rose 2.13% on the TASE today to NIS 187, having closed at $50.75 on Nasdaq on Friday, giving a market cap of $45.62 billion.
Published by Globes, Israel business news - www.globes-online.com - on November 14, 2010
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