Initiating Teva Pharmaceuticals with a Buy

We are initiating coverage on Teva Pharmaceutical Industries (TEVA) with a Buy recommendation and a price target of $52.

Teva posted strong financial results in 2008 despite the global recession. The company witnessed robust top- and bottom-line growth during the year. We expect the strong performance to continue, and believe the current share represents an attractive entry point.

We believe Teva has significant growth opportunity thanks to many products going off-patent in the next few years, several for which the company has filed ANDAs (abbreviated new drug applications). The number of ANDAs filed by the company with the U.S. Food and Drug Administration (FDA) now stands at 201, representing more than $110 billion in branded sales. New generic product launches over the next few years should help drive sales.

The acquisition of Barr Pharma in December 2008 should help Teva strengthen its position as a leading generic player not only in the U.S., but also in Europe. This acquisition has boosted Teva’s product portfolio, which now includes several generic pharmaceutical products as well as women’s health products.

The combined company should also have greater resources and expertise in biogenerics (biosimilars). This acquisition should enhance Teva’s leadership position in the U.S. and allow it to expand its presence in Europe.

We are also pleased with the company’s efforts to invest significantly in its pipeline – both generic and innovative products. The biogenerics market is huge and represents significant commercial opportunity for the company.

Teva entered into an agreement with Lonza earlier this year for the establishment of a joint venture that will focus on the development of biogenerics. The company should be in a position to start launching products under its joint venture with Lonza from 2013.

Read the full analyst report on “TEVA”
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