Teva Falling Under Sends Oppenheimer to the Sidelines
Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) is looking at having to slash 7,000 jobs from its work force after posting a mammoth second-quarter loss yesterday. Employees spanning across 45 countries around the world and investors alike were faced with a rude awakening yesterday, as the Israeli drug maker’s stock plummeted 24% to the floor yesterday, with plans to shut down 15 factories by the end of next year.
In reaction, Teva loses a bull in Oppenheimer analyst Derek Archila, who is not happy to take a sharp left to the sidelines, but he sees the ending of a former growth tale at stake.
Subsequently, the analyst downgrades from an Outperform to a Perform rating on shares of TEVA while striking the former $41 price target from the table. (To watch Archila’s track record, click here.)
What of the struggle to find leadership to guide the biotech ship as its tussled by cost and generic headwinds? Another potential peg in the downgrade for Archila is Teva’s diminished chances to find the talent it needs to redirect a necessary turnaround: “We are no longer confident the company will be able to find a permanent CEO in the near term since it has already been six months. We believe it may be difficult for TEVA’s board to attract top talent (meaningful pharma CEO experience) given the company’s ongoing challenges.”
Archila concludes, “We no longer see a clear path for TEVA to return to growth in a timely manner and continued pricing pressure in US generics makes us less optimistic its US generic business will meet/exceed Street expectations in the 2H17. We do not view TEVA as a growth story in the near-to-medium term and continued focus on cost cutting/ divestments are required to ensure it meets its debt obligations. While we dislike downgrading shares when they are down ~15%, we believe TEVA’s CEO search will likely take longer than expected, eventual sale of AGN’s shares will put further pressure on the stock and we are concerned continued deterioration in generic pricing could impair its ability to de-lever.”
Endo’s debt glaringly circles $35 billion, but management hopes to pay off roughly $5 billion of its financial shackles this year- assuming proceeds from divested business are intact. The Endo team has guided to “high single-digit erosion” in the back half of the year for its generics business.
TipRanks analytics exhibit TEVA as a Buy. Out of 11 analysts polled by TipRanks in the last 3 months, 3 are bullish on Teva stock while 8 remain sidelined. With a return potential of nearly 49%, the stock’s consensus target price stands at $35.38.
Endo’s Bigger Picture Still Bullish
Endo International (NASDAQ:ENDP) shares were diving almost 6% yesterday ahead of its print due next Tuesday. Consider for one that legal contention continues to swirl around whether the biotech firm crookedly marketed prescription opioid painkiller risks, understating the liabilities. Meanwhile, Endo likewise has announced intentions to scratch its operations in Alabama, cutting 18% of its workforce- 875 jobs will be cleared from the deck. It is no wonder investor sentiment is promptly retreating in Endo’s wake.
Mizuho analyst Irina Rivkind Koffler has not left Endo just yet, as she lays out a bullish case for the stock, believing the firm has takeout potential that is compelling.
Approaching Endo from a positive vantage point ahead of its second-quarter financial results, the analyst reiterates a Buy rating on the stock with a $19 price target, which implies a just under 92% upside from where the shares last closed. (To watch Koffler’s track record, click here.)
Koffler explains, “Stock looks attractive in front of 2Q:17: We think that ENDP has been selling off due to concerns about generic price pressure as competitors and wholesalers reported weak generics performance. Big picture we continue to like the stock for its attractive position in a consolidating sector summarized in this July 27 article: As drug prices drop, generics makers fight back with deals. Furthermore, we still don’t rule out the possibility of a Xiaflex sale as companies like Allergan establish a leadership position in body contouring, which would help to further de-lever this increasingly streamlined company. We acknowledge the legal overhangs in ENDP but also don’t expect them to deter a potential buyer. We have updated our SOTP to 2018 multiples that take into account lower sales in branded and international segments but still arrive at a potential takeout range of $19-$23/share.”
TipRanks analytics show ENDP as a Hold. Based on 13 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Endo stock while 10 maintain a Hold. The 12-month average price target stands at $14.55, marking a nearly 47% upside from where the stock is currently trading.