"Barron's" predicts that Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) could rise 40% over the next 18 months, including a 2% dividend yield, "if the company can quell fears about future growth." Correspondent Johanna Bennet says that Teva, the world's largest maker of generic-prescription drugs, hasn't lived up to its enormous potential.
Bennet says that at less than $40 a share and at less than seven times forward earnings, Teva has never been so cheap. The share has fallen 27% so far this year despite estimates that the $200 billion global market for low-priced versions of branded-prescription medications will nearly double over the next five years.
Bennett believes that, thanks to a string of acquisitions, rising demand for generic drugs here and abroad, and new products, Teva could double its revenue by 2015. She cites Matrix Asset Advisors president and CIO David Katz as saying, "This company has done a number of things that investors can sink their teeth into, but the stock isn't getting credit for any of it."
In addition, Leerink Swann initiated the shares at "Outperform", earlier this month. The analysts consensus is for Teva to report earnings per share of $5.06 in 2011, up 11% on 2010, and to rise a further 12% in 2012.
Frost Investment Advisors fund manager Ted Harper, "In this environment, you are getting a yield equal to a 10-year Treasury note and a call option on a global increase in the penetration of generic drugs.
In December 2010, when Teva was traded at $48.75, "Barron's" gave it a bullish recommendation. "Our call was premature - or wrong. A dearth of generic-drug launches during the first half of 2011 has hurt Teva's US generic-drug sales. Plus, Copaxone is facing increasing competitive threats, the biggest being a patent challenge by Mylan (NYSE: MYL) and Momenta Pharmaceuticals (Nasdaq: MNTA). Teva is fighting Mylan and Momenta in court and a decision is expected next year.
Bennett says, "But the drug maker isn't sitting idle. In May, Teva announced a $6.8 billion deal to acquire US specialty drug maker Cephalon (Nasdaq: CEPH) to boost Teva's presence in the branded-drug industry. The purchase will double sales of branded-prescription pharmaceuticals to $7 billion and create a pipeline with more than 30 compounds in late-stage trials.
"In March, Teva unveiled a joint venture with Procter & Gamble (NYSE: PG) that combined their over-the-counter drug businesses outside North America. Last year the company paid $5 billion for German generic-drug maker Ratiopharm."
Teva's share price rose 2% on Nasdaq on Friday to $39.42, giving a market cap of $37 billion, and rose 0.7% in morning trading on the TASE today to NIS 142.10.
Published by Globes [online], Israel business news - www.globes-online.com - on August 28, 2011
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