Excellence Investments Ltd. has initiated coverage of Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) with a "Market perform" recommendation and target price of $45, the day before Teva publishes its financial report for the fourth quarter and full-year of 2011.
Excellence analyst Gilad Alper is quite downbeat on Teva. "Teva is traded at the lowest multiple in the industry. We believe that until its new management formulates a new and persuasive strategy, the challenges facing the company and its failure in dealing with them justifies the low multiple."
Alper attributes the disappointing performance by Teva's share in the past year to its failure to deal with three main challenges: pending generic competition to its main source of income, Copaxone for the treatment of multiple sclerosis; the lack of new exclusive launches of generic drugs in the US, which hit the company's revenue hard; and Teva's last two acquisitions, which he asserts were not the best use of its capital.
Alper says that the appointment of Jeremy Levin as Teva's new CEO is "a clear signal that the company's board of directors admits the need for strategic change." He points to Levin's statement that Teva's future lies in Asia, and notes the rumors swirling about a major acquisition in India. "Levin must act quickly," he says. "Copaxone, which contributes 42% of Teva's net profits, is liable to face severe competition in 2013, causing Teva's cash flow to dwindle."
Alper concludes that Teva has just 2-3 years of easy access to the financial resources needed to correct its business strategy.
Teva's share price fell 0.6% by mid-afternoon on the TASE today to NIS 163.70, after falling 0.4% on Nasdaq yesterday to $44, giving a market cap of $38.9 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2012
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