A 6.4% spurt by the Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) share least week pushed it back above $60 for the first time since April 2010. In effect, taking into account the dividends distributed since that time, the share set a new record last week.
After shooting up 4.5% on Thursday, the Teva share weakened slightly, finishing up at exactly $60, reflected a $51.1 billion market cap, above the symbolic level of $50 billion. According to Thomson/First call data, the share is nearing the $63.50 average target price set by the analysts.
Of the 28 analysts covering Teva, 17 recommend the share positively, 10 are neutral, and only one recommends selling the share. Managed by CEO Erez Vigodman, in recent days Teva has been the focus of rumors and speculations that it will acquire Mylan, its competitor.
If and when such a deal goes through, and it is by no means certain that it is being planned (rumors of this type arise periodically), it will be a giant deal, because Mylan's market cap is nearly $23 billion, and an acquisition usually requires a premium on the market value. Mylan is one of the world's largest generic drug companies (Teva is the largest), and, like Teva, it also develops and markets proprietary drugs and active pharmaceutical elements. One of the drugs being developed by Mylan is a generic version of Teva's Copaxone, and the two companies are in legal proceedings in the matter." Citigroup analyst Liav Abraham wrote at the end of last week that speculations about pharma mergers had resurfaced in recent days, including Teva/Mylan. She explained that there were few mid-cap assets around, and predicted that the pace of major mergers in the market would subside for quite some time.
She added, however, that there were still many opportunities for smaller acquisitions, especially in view of the wave of IPOs in the pharma and biotech market in recent months. She believes that what is really important is organic growth, but she recommends that investors should not ignore the opportunities presented by smaller acquisitions, especially those likely to contribute to the acquiring company's pipeline of products in the long term. As an example of such an acquisition, she cites Teva's acquisition of Labrys last year.
Abraham states that in an industry with a trend towards consolidation, companies that are not exclusively dependent on mergers and acquisitions are preferable for the purpose of attaining future growth, mentioning Actavis and Teva in this context.
Published by Globes [online], Israel business news - www.globes-online.com - on March 15, 2015
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