Teva Pharmaceutical Industries Ltd’s (ADR) (TEVA) Headwinds Need to Be Tackled, But Potential Remains

Cantor's Louise Chen met with Teva's team yesterday and still sees reason to be sidelined until generics pricing gets better.

Cantor analyst Louise Chen is out with a cautiously optimistic research note on Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) after meeting with the troubled Israeli pharma giant’s management team.

Believing the team has its hands full “solving for the coefficient of friction in 2018,” the analyst maintains a Neutral rating on TEVA stock with a price target of $10, which implies a close to 15% downside from where the shares last closed. (To watch Chen’s track record, click here)

Any news on a guide for next year from Teva? Chen says no, especially considering: “Teva has got its guidance wrong three times this year already, so the company is not providing any numbers for 2018, until the new CEO has had time to review the business in detail.”

Meanwhile the “Copaxone impact in 2018 is fluid,” the analyst continues, anticipating that five cents of the $0.30 impact in the back half of this year from Mylan marching into the market, guns blazing, can be attributed to shelf stock adjustments. “That said, Teva cautioned against annualizing the 4Q17 $0.25 impact into 2018,” notes Chen, who predicts that Momenta and Pfizer could hit the market by the end of this year or the start of next year. If not, prepare that Mylan’s prices could then go up.

Meanwhile, the giant has yet to launch an AG, reduce expenses, or search for additional direct to patient prospects. “And 60% of patients that switched to Glatopa came back to Copaxone 20mg. This could happen for 40mg as well,” predicts the analyst.

On an encouraging note, launches next year in brand and generics could garner some upside opportunity for Teva. On another positive front, the analyst notes that an asset sale for EU pain and oncology could put over $1 billion in Teva’s hands.

Ultimately, “After catching up with Teva today, we still like the company, but think that Teva has some meaningful headwinds (debt paydown, generic drug pricing pressure, go forward business strategy) which need to be addressed before the stock can trade higher. We would be more positive on Teva shares if generic drug pricing improves and/or the brand drug launches and pipeline advancements exceed expectations,” Chen concludes.

Wall Street is split on this debt-laden biotech giant, with TipRanks analytics exhibiting TEVA as a Hold. Based on 20 analysts polled by TipRanks in the last 3 months, 3 rate a Buy on Teva stock, 13 maintain a Hold, while 4 issue a Sell on the stock. The 12-month average price target stands at $15.21, marking a 29% upside from where the stock is currently trading.

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