IBI sees 50% upside in Teva

Kare Schultz  / Photo: Kadia Levy
Kare Schultz / Photo: Kadia Levy

IBI analyst Steven Tepper sees a leaner and more efficient Teva returning to growth in 2021.

IBI Investment House senior research analyst pharmaceuticals, biotechnology and medical devices Steven Tepper sees a more than 50% upside in the share price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and expects the drugmaker to return to growth in 2021 as a leaner and more efficient company. He has given the Israeli pharmaceuticals company an "Outperform" recommendation and share price target of $16, more than 50% above its closing price on Wall Street yesterday of $10.44.

Tepper said, "At this stage, the legal risks are over-priced in the share's current price. Clarifications regarding the opioid affair by itself could relieve the pressure on the share price, which would trade at a value that would better reflect business activities."

Teva explains that over the past three years Teva CEO Kare Schultz has stabilized business activities through reorganizing the company, sharp cuts in expenditure and lowering Teva's debt. In 2020, the company's operations were not adversely effected by the Covid-19 pandemic, although the black cloud of legal proceedings still hangs over Teva and has influenced the recovery of its share price.

Tepper says, "In 2021, Teva is expected to begin to show signs of growth, which will come mainly from branded products and new launches in the generics sector, led by biosimilar products and complex generics. The company is expected to continue the streamlining process in its production system and to improve profit margins, and to also lead growth in profitability."

In generics activities, Tepper forecasts modest growth in 2021 after the rate of erosion in prices in the US slows down. On branded drugs, Teva's engine of growth, Tepper sees continued strong growth in sales of Austedo for the treatment of tardive dyskinesia and Huntington's disease chorea, "with the first buds of sales in China." He estimates Austedo sales of $850 million in 2021 compared with $650 million in 2020.

Tepper also believes that revenue from migraine treatment Ajovy will continue to grow, after the launch of an automatic injectable version and the expansion of indemnity in Europe. He sees sales of Ajovy doubling in 2021 to $400 million.

On the other hand, Tepper expects sales of multiple sclerosis drug Copaxone to continue to erode, although more moderately, following the expiration of its patent in the US several years ago. Tepper also mentions that Teva awaits US Food and Drug Administration (FDA) approval for chronic pain treatment Fasinumab.

Tepper writes, "The legal crises will continue to hang over the company in 2021 but in our opinion there is a good chance that a settlement will be reached in the opioid affair." However, he sees the price colluding litigation continuing for many years.

He expects Teva's debt to fall to $21 billion by the end of 2021 with Teva looking to recycle some of its debt in 2023.

Published by Globes, Israel business news - en.globes.co.il - on December 16, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Kare Schultz  / Photo: Kadia Levy
Kare Schultz / Photo: Kadia Levy
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