Teva's big debt offering for financing the acquisition of Allergan's generics division is underway, with talks taking place with investors in the US and Europe. Teva is due to complete the pricing stage of the bond issue in the next few days, and to raise over $20 billion.
Teva originally planned the offering for the fourth quarter - it has a bridging bank loan that gives it flexibility over the timing - but brought the timetable forward because of the low interest rate environment. Teva also published its multi-year guidance last week, earlier than expected, even though it had not yet completed the Allergan deal.
Teva is paying $35.1 billion net and nearly $40 billion gross for Allergan generics division Actavis. The companies are still waiting for approval from the US Federal Trade Commission in order to complete the deal signed a year ago.
Meanwhile, analysts covering Teva have responded to the guidance provided last Wednesday. The standout response was from Jami Rubin of Goldman Sachs, who cut her recommendation for the stock from "Buy" to "Neutral" and her price target by $10 to $60, 10.7% above market, saying that Teva had limited upside and faced headwinds of higher leverage and uncertainty over its blockbuster MS treatment Copaxone. Rubin casts doubt on Teva's ability to meet its forecasts, despite the strategic value and contribution to earnings per share of the Actavis deal. Teva said it did not see generic competition to its double-dose Copaxone in the next few years, whereas Rubin sees a risk of generic competition coming earlier.
Other investment banks have cut their price targets for Teva. Marc Goodman at UBS cut his price by $2 to $60, keeping his recommendation at "Neutral", saying the guidance was better than expected but looked too aggressive. Oppenheimer has cut its price target from $77 to $72, but kept its recommendation at "Outperform". Oppenheimer sees a legal decision on Copaxone in early 2017, and believes that at current pricing 'the risk-reward is favorable.'
Meanwhile, Teva was accepted last week as a member of PhRMA, Pharmaceutical Research and Manufacturers of America, along with four other companies.
Teva's accession to membership was not smooth, as executives of other companies argued that it had a conflict of interests, since in addition to its original drug development activity it is the world's largest generic drugs producer, a status that will be bolstered once the Actavis deal is completed.
Published by Globes [online], Israel business news - www.globes-online.com - on July 18, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016