Swiss investment bank UBS has lowered its recommendation on Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) from "Buy" to "Neutral" and cut its target price per share from $22 to $12, which is still nevertheless a 10.4% premium on the Israeli company's current share price.
UBS decided to reconsider Teva's share price two weeks ago after the company and other generic manufacturers were sued in Connecticut for price fixing. UBS analyst Navin Jacob writes that the price target cut also comes after the Oklahoma opioid settlement in which Teva will pay $85 million for its contribution thre to addiction to the painkillers.
Jacob estimates that Teva could be forced to pay as much as $4.1 billion for the price fixing and opioid lawsuits in the US, much higher than its previously estimated $1 billion. He estimates Teva could have to pay between $606 million and $3.2 billion for the price fixing (average $1.9 billion) and between $154 million and $4.25 billion for the opioids (average $2.2 billion).
Other reasons listed by UBS for the lower recommendation includes delays in new generic launches, and the uncertainty caused by the settlement in Oklahoma, after Teva's management had insisted that it would not agree to a settlement.
Jacob says that Teva's management has told him that the company expects the price fixing lawsuit to continue for several years and that during an internal investigation in November 2017, no evidence of price fixing was found.
UBS believes that Teva will successfully complete its streamlining plan this year to cut costs by $3 billion and that new generic launches will offset the weakness in the US generic market.
Published by Globes, Israel business news - en.globes.co.il - on May 28, 2019
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