Teva Pharmaceutical Industries Ltd, the world’s worst-performing healthcare company this year, has more buy recommendations than Novartis AG and Sanofi as analysts bet the Israeli maker of generic drugs will boost profits.
Teva, whose American depositary receipts plunged 8.4 per cent this year as competition grew against its multiple sclerosis injection treatment Copaxone, is looking for new sources of growth and will consider more acquisitions, Chief Executive Officer Shlomo Yanai told analysts on May 16. The decline pushed the Petach Tikva-based company to $47.76 on the Nasdaq Stock Market, or less than 10 times estimated earnings, compared with 12.32 for the S&P 500 Health Care Index.
“It has been under a lot of pressure lately, but Teva under $50 is a great opportunity,” Gadi Beer, who manages $25 million including Teva shares in his Amidex35 Israel Mutual Fund, said by telephone from Willow Grove, Pennsylvania. “At this price, there’s nowhere else to go but up.”
More than 80 per cent of analyst ratings compiled by Bloomberg for the world’s largest producer of generic medicine are buy recommendations, compared with 74 per cent for Basel, Switzerland-based Novartis and 63 per cent for Paris-based Sanofi. Teva’s drop this year was the biggest among 117 healthcare companies with a minimum market value of $10 billion, according to data compiled by Bloomberg.
COPAXONE COMPETITION
Copaxone, which accounted for 22 per cent of Teva’s sales last quarter, faces competition from the first multiple sclerosis pill, Novartis’ Gilenya. An April trial of laquinimod, a multiple sclerosis pill under development by Active Biotech AB and Teva, fell short of expectations from Credit Suisse Group AG analysts.
Teva said on May 16 that it agreed to buy a 57 per cent stake in Taiyo Pharmaceutical Industry Co for $460 million to benefit from Japan’s push to broaden the use of copycat medicines. Teva outbid Valeant Pharmaceuticals International Inc on May 2 for Cephalon Inc in a $6.2 billion deal.
The Bloomberg Israel-US 25 Index of the largest Israeli companies traded in New York rose 1 per cent last week to 611.01. The measure is down 2.2 per cent this year.
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Israel’s benchmark TA-25 Index advanced 1 per cent last week. The Tel Aviv measure gained 0.6 per cent to 1,270.64 at 12.25 pm in Tel Aviv. It has lost 4.2 per cent this year, or 0.1 per cent in dollar terms, data compiled by Bloomberg show. Teva’s Israeli shares gained 0.1 per cent today to 162.6 shekels.
Teva said that an April 12 trial of laquinimod showed the drug reduced relapses by 23 percent compared with a placebo. Laquinimod was expected to reduce relapses by 25 percent to 30 percent, analysts at Credit Suisse Group including Ravi Mehrotra wrote in a note on April 7.
Multiple sclerosis, which affects about 2.1 million people worldwide, is a chronic and incurable disease that destroys the nerves and robs patients of their ability to control their movements. Many patients have trouble staying on current therapies because they’re difficult to use or cause side effects, according to the National Multiple Sclerosis Society.
Teva will probably say second-quarter adjusted earnings rose to $1.09 per share from $1.08 in the same period last year, according to the median estimate of 22 analysts surveyed by Bloomberg. The company will announce the results on July 27.
“The main reason for the underperformance this year is Copaxone,” said David Buck, an analyst at Buckingham Research Group in New York, who lowered his price estimate for the shares last week to $62 from $66. “It’s the generic competition concern.”
Buck also reduced his second-quarter earnings per share estimate to $1.06 from $1.08, according to a report on July 22. He maintains his “buy” rating for the company.
Teva has lagged behind Novartis’ 7.9 percent decline this year and Sanofi’s 15 percent gain.
VENTURE CAPITAL
Israel, whose population of 7.7 million is similar to Switzerland’s, has 58 companies traded on the Nasdaq, the most of any country outside the U.S. after China. It is also home to the largest number of startup companies per capita in the world.
Israeli technology companies raised $569 million in capital during the second quarter of 2011, the most in two years and up from $343 million in the same period last year, according to the Israel Venture Capital-KPMG Quarterly Survey released July 13.
Israel’s stock market was upgraded to developed market status by MSCI Inc. in May 2010, the same month the 63-year-old country was accepted to the Organization for Economic Cooperation and Development.
The shekel was unchanged at 3.3964 per U.S. dollar as of 6 p.m. New York time on July 22. The currency has increased 6.8 percent versus the dollar over the past six months, the third- best performer among 10 emerging markets in Europe, Middle East and Africa tracked by Bloomberg.
EZCHIP PROFIT
EZchip Semiconductor Ltd., the Israeli maker of network processors that counts Cisco Systems Inc. as a customer, rose 2.2 percent to $34.62 on July 22. EZchip fell 2.9 percent to 117.50 shekels in Tel Aviv today.
The company will probably rise 9.8 percent to $38 in the next 12 months, up from a previous estimate of $35, Jay Srivatsa, an analyst at Chardan Capital Markets LLC in New York, wrote in an e-mailed report dated July 22.
EZchip will probably say it expects third-quarter revenue of $18.6 million to $19 million, beating estimates of $18.5 million, Srivatsa said. The company is scheduled to report second-quarter earnings on Aug. 3.
Mellanox Technologies Ltd., the biggest Israeli maker of data-center adapters and software, climbed to a record after reporting second-quarter profit that beat analysts’ estimates. The shares soared 20 percent in the two days following the company’s earnings’ report to $34.32, the biggest two-day advance on record, according to data compiled by Bloomberg.
The Tel Aviv-traded shares rose 8.9 percent, their biggest jump since May 11, to 113.60 shekels, or the equivalent of $33.45.