DS Brokerage says that 2012 will be the peak year of sales for Copaxone, Teva Pharmaceutical Industries' (NYSE: TEVA; TASE: TEVA) multiple sclerosis treatment, due to new competition, although no generic versions will reach market before 2015. Analyst Richard Gussow today initiated coverage of Teva with a "Buy" recommendation and target price of $50.
Gussow says, "The patent expiration of Copaxone, which accounted for nearly 20% of 2011 sales and roughly half of earnings per share, is perhaps of greatest concern to investors. While the patent is due to expire in 2014, we believe Teva’s court victories and the possible need for generic trials effectively delay a competing generic launch until 2015. At the same time, Phase III trials show that Copaxone can be used at lower frequencies using larger doses. If approved by the FDA, it could soften the impact from the launch of generic Copaxone and could push off much of the generic competition until 2017. That said, with new competition, 2012 is likely to be Copaxone’s peak year."
Gussow concludes, "While there are legitimate concerns regarding competition to Copaxone, investors are overly penalizing the stock, as based on the current valuation the market is not applying any value to Copaxone."
Gussow says that Teva is poised to benefit from the window of opportunity in the generic sector, as it can leverage its leading market position to benefit from the record number of drugs coming off patent through 2015. He cites IMS figures, which predict that generics share of the pharmaceutical market will rise from 27% in 2010 to 39% in 2015. "In addition, legislation promoting generics over branded products and the fast growth of "pharmerging" markets should contribute to generics outperforming branded products over the next several years," he adds.
Gussow expects Teva's new president and CEO Dr. Jeremy Levin to present a new strategic plan and 2013 guidance by the end of this year. "We believe management will seek to compensate for the expected decline in Copaxone through acquisitions of mainly smaller branded companies with promising pipelines. With the current opportunity in generics, we expect Teva to maintain focus on its core generic business, particularly on penetrating new markets in Japan and Russia."
Gussow predicts that Teva will report a net profit of $4.74 billion ($5.43 per share) on $20.6 billion revenue in 2012, rising to a net profit of $5.06 billion ($5.82 per share) on $21.6 billion revenue in 2013.
Teva's share price fell a further 0.3% by mid-afternoon on the TASE today to NIS 155.60, after falling 3.1%, yesterday, following a 0.1% dip on the NYSE on Friday to $39.51, giving a market cap of $34.3 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2012
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