Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) share price jumped 13.1% on Thursday and Friday in New York after the company upwardly revised its guidance for 2018 and its third quarter results exceeded the analysts' profit forecast.
On Thursday, Teva reported a $273 million GAAP net loss and a $694 million non-GAAP (excluding various accounting items) net profit on $4.5 billion in revenue in the third quarter. The share price closed at the weekend at $22.60, reflecting a $23 billion market cap for the company, exactly one year after the share fell to $11.16.
In response to the results, investment bank RBC raised its target price for the stock from $19 to $22, 2.6% below the current price, while retaining its "Market perform" recommendation. Analyst Randall Stanicky wrote that Teva had had a good quarter and that the share had leaped on Thursday because of low expectations: "From now on, Teva is a story in three parts: finding stability in generics, limiting the decline in Copaxone, and creating growth from the Austedo and Ajovy drugs." Stanicky believes that the stable part of the business is 50% of revenue (generic drugs in the US), with a $800 million-$1 billion quarterly revenue rate from it, which will help visibility. The declining part is Copaxone and original respiration products ProAir and QVAR; Stanicky says that Copaxone is showing better-than-expected results in the face of competition from generic drugs, which is helping Teva to cut down its leverage in the short term. He also cited its contribution to cash flow and EBITDA. Concerning Teva's growth engines, Austedo and Ajovy, Stanicky writes, "The big question is whether these growth engines will be enough to compensate for the anticipated decline in Teva's traditional products."
$1.8 billion in savings already from Teva's cost-cutting
Credit Suisse also refers to anti-migraine drug Ajovy, recently launched by Teva. Analyst Vamil Divan says that there are encouraging initial signs for the drug's launch; combined with what Teva's management said about signs of stability in the generic drugs sector and progress in cost-cutting, this boosted the company's share price. He believes that the fact that 20% of patients use a quarterly dosage of Ajovy is positive, because this is the only drug with a quarterly dosage - something that distinguishes it from its competitors in the market, which have a monthly dosage. Credit Suisse retained its "Neutral" recommendation for Teva's share and its $26 target price.
Mizuho Bank takes a more positive view, recommending "Buy" for the share with a $29 target price (a price that Teva's share has not reached since its big slide in 2017). Analyst Irina Koffler writes that Teva's results were strong, and that she believes that its management is doing good work. Koffler adds that Copaxone is showing far greater resilience than expected, Austedo is outstripping expectations, and Ajovy's launch is encouraging. She also notes that Teva's cost-cutting program has already saved the company $1.8 billion.
Published by Globes, Israel business news - en.globes.co.il - on November 4, 2018
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