More and more analysts are expressing confidence in the stock of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). Data from “The Wall street Journal” shows that just three months ago the analysts’ consensus on Teva’s share was neutral, whereas today it is positive.
The Israeli pharmaceutical company, managed by CEO Richard Francis, published its financial results last week for the fourth quarter of 2023 and full-year 2023, in which it returned to growth after five years of shrinking revenue, and according to its 2024 forecast, growth will continue this year.
Teva’s share price rose 4.7% after the publications of the results and the company’s market cap is currently $13.9 billion. The fourth quarter results were impacted positively by the first payment that Teva received from Sanofi for the development of its drug for irritable bowel syndrome. Teva also announced its intention of selling its TAPI active-pharmaceutical ingredient (API) business activity, which will bring in more funds for financial flexibility and help it reduce its debt.
Many affairs have been sold
Bank Hapoalim research division desk head Yaron Friedman describes 2023 as a turning point for Teva. “During the year, the company managed to resolve the opioids (addictive pain relievers) case, the heaviest millstone it has had around its neck in recent years; signed a compromise in the price fixing case; continued to reduce its net financial debt; successfully completed the installation of a new CEO; presented a new strategic plan for the coming years; and most importantly, after years of contraction, the company returned to show revenue growth.”
Friedman adds that good finiancial results plus the launching of schizophrenia drug Uzedy, the deal with Sanofi and putting TAP up for sale, as well as continuing to service its debt led to a continued recommendation of “Outperform” with high risk. The share’s target price has risen from $12 to $15, a 22% premium over the current market price, and Friedman explains that in recent years the share has been priced at a significantly lower multiple than comparable pharma stocks but now the relevant multiple is rising, and with it the target price.
Even before publication of its financial results last week, Jefferies raised its recommendation on Tel from “Hold” to “Buy” and its price target from $10 to $14.
Barclays has also raised its price target for Teva from $15 to $17, a 38% premium on the Israeli pharmaceutical company’s Wall Street share price and keeps its recommendation at “Overweight.” The new price target is based on an EV/EBITDA (the value of its activities in relation to profit after tax and other deductions) multiple of 7.5. Barclays analyst Balaji Prasad met with Teva CEO Richard Francis and CFO Eli Kalif who expressed their confidence in meeting the 2024 target as well as long term targets for 2027.
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In the field of branded drugs, Prasad notes the strong performance of Austedo, Teva’s branded drug for the treatment of movement disorders, which recorded sales of over $1.2 billion in 2023, and Teva aims for $2.5 billion sales in 2027. He also mentions the progress in Teva’s product pipeline, including the irritable bowel syndrome treatment in joint development with Sanofi, with phase II clinical trial results due in the second half of 2024.
On the sale of TAPI, Barclays estimates that it is an attractive asset for buyers and that its sale will lower Teva’s leverage and allow it to allocate funds for business development. The analyst further adds that most of the legal issues have already been resolved and only the procedure regarding alleged illegal payments to promote Copaxone remains, which does not significantly weigh on the company.
The launch was postponed
Oppenheimer has retained its “Perform” rating for Teva, without stipulating any price target. The investment house’s analysts wrote after the company published its results that it seems that CEO Francis’s strategy is beginning to be realized – Teva finished a strong year with $15.8 billion revenue ( including $500 million from Sanofi), which represents 7% growth, and it expects further growth of 4.3% in 2024.
Oppenheimer also mentioned the biosimilar field as representing a significant engine of growth for the company. This includes Humira for the treatment of arthritis, which saw its launch postponed probably until this year, and Stelara (for digestion ailments), which Oppenheimer estimates will enter a more open market, with no strong generic alternative treatments.
Published by Globes, Israel business news – en.globes.co.il – on February 6, 2024.
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