Deutsche Bank cites a wholesale drug pricing Medi-Span report that Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) "recently implemented a series of unusually robust price increases for several legacy Cephalon branded products." Deutsche Bank reiterated its "Buy" recommendation for Teva and target price of $46, 15% above yesterday's closing price of $40.05 on Nasdaq.
Deutsche Bank analysts David Steinberg, Edward Chung, and Aaron Mishel state that Teva raised the prices of pain reliever Fentora and wakefulness drug Provigil by 15% on October 20. The price hikes came shortly after Teva closed the $6.7 billion acquisition of Cephalon. They note, however, "While the benefit on Provigil will be short lived as it is now just 4 months from being genericized, Teva raised the price of Nuvigil by a whopping 25% - on top of an 8% increase last May. Taken together, these recent increases could likely bolster the outlook for Teva's North American pharmaceutical sales in the fourth quarter and, more importantly, in 2012."
The analysts also note a 9% price hike by Novartis AG (NYSE:NVS; LSE: NOV; SWX: NOVZ) for its oral multiple sclerosis treatment, Gilenya, which could provide Teva with a pricing umbrella for Copaxone in 2012.
Deutsche Bank also examines Teva's core generics business, pointing to last weeks deal on generic high cholesterol treatment, Lipitor, with India's Ranbaxy Laboratories Ltd. (BSE: 500359), which could potentially be a very meaningful opportunity well beyond the end of the 180-day exclusivity period, becoming a $650-900 million generic market. The analysts estimate that, based on four generic Lipitor competitors, Teva could see an earning per share upside of $0.15 ($134 million).
Other near-term catalysts which could bolster Teva's share price include management updating the 2012 guidance before the end of the year, a potential decision on the Copaxone trial, improvement in the US generics business led by Zyprexa (which Teva launched in October) and Lexapro (which will be launched in March), and other generic launches in the US, and finally, potential further elucidation of capital deployment, such as higher dividends and a larger share buyback program.
Published by Globes [online], Israel business news - www.globes-online.com - on December 7, 2011
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