Goldman Sachs cuts Teva to "Sell"

The US bank says Teva faces increasing pressure from an accelerated generic Copaxone timeline, and has zero upside.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) has 0% return potential, says Goldman Sachs, which has cut its recommendation for the share from "Neutral" to "Sell". Analyst Jami Rubin writes, "While the pharma space has been awash with accretive deal activity, Teva has been relatively quiet as the focus remains on rebuilding its pipeline."

Goldman Sachs is the first investment house to give Teva a "Sell" recommendation. Rubin adds, "We also see Teva as facing increasing pressure from an accelerated generic Copaxone timeline."

Copaxone, for the treatment of multiple sclerosis, is Teva's best-selling drug, with $4 billion in sales in 2012, and reportedly accounts for half of its profits. Last Friday, the US Court of Appeals for the Federal Circuit ruled that the patents protecting Copaxone from generic competition were only valid until May 2014, and not until September 2015. "We believe a potentially earlier generic entry would give Teva less time to convert business to the tri-weekly dosing which is a key strategy," says Rubin.

Rubin cut her earnings per share forecast for Teva by 2% in 2014, 3% in 2015, and 4% in 2014. "We see Teva's earnings per share as flat to declining over the next five years - stagnating at around $5.00 or less," she says. Goldman Sach's current forecasts for Teva are below the market consensus, and Rubin believes that the consensus will fall.

Rubin concludes, "We recognize that the stock trades at a discount to its historic multiple and we do not see much downside, however, other names in the space remain more attractive."

Rubin also cut her target price for Teva by $1 to $40, which compares with a closing price yesterday of $39.90 on the New York Stock Exchange.

Published by Globes [online], Israel business news - - on July 30, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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