Teva Pharmaceutical Industries Ltd (ADR) (TEVA) Gets a Price Target Cut Ahead of Q3 Results

Irina Rivkind Koffler worries that the Copaxone generics competitive backdrop threatens TEVA immensely.

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) may be delivering its third quarter financial results for the year on Thursday before the bell tolls, but Mizuho analyst Irina Rivkind Koffler dismisses the print already as “largely irrelevant.”

While the analyst is not quite bearish on the Israeli pharma giant just yet, her quarterly earnings preview is not a cautiously optimistic one, with Koffler reiterating a Neutral rating on TEVA stock while dialing down the price target from $16 to $15, which implies a 11% increase from current levels. (To watch Koffler’s track record, click here)

Koffler believes the generics market is set to hurt Teva in the market: “TEVA suffers from Copaxone generic uncertainty; in addition, we expect new management to further guide down worst case scenarios, and a downgrade of the debt to high-yield,” adding that neither cost cutting not asset sales will be enough, and leverage could linger at steep levels for an unknown period of time. Meanwhile, with the giant’s remaining assets low margin ones at that, the analyst finds this renders de-levering altogether “challenging.”

Explaining the price target trim, the analyst provides some context: “We introduced 2017 generic Copaxone competition into 4Q:17 estimates and outer years, and lowered OpEx after the sale of the Women’s Health business, Copaxone generic competition, and assumed cost-cutting activities from the incoming CEO. Mgmt. identified its ~$1.3B respiratory business as a potential next sale target (while it divests its $360M EU pain/oncology franchise). We think we could ultimately end up with a purely generic Teva. with a small portfolio of CNS brands. We don’t yet model this hypothetical corporate structure and forecast continued erosion instead (vs. FactSet consensus stabilization in 2019).”

Moving forward, the market looks uphill for Teva’s multiple sclerosis (MS) drug Copaxone, especially as generics rivalry intensifies. “Copaxone competitive landscape may worsen on both the 20 mg and 40 mg doses,” Koffler fears, apprehensive on Teva’s future.

This Mizuho analyst is not the only one surveying the troubled Israeli pharma giant’s prospects from the sidelines, as TipRanks analytics exhibit TEVA as a Hold. Based on 20 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Teva stock, 14 maintain a Hold, while 3 issue a Sell. The 12-month average price target stands at $21.12, marking a 55% upside from where the stock is currently trading.

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