Oppenheimer Raises Teva Outlook to Outperform

Analysts foresee Copaxone keeping its market share for the time being, don't see Gilenia taking off.

OppenheimerFunds has raised its outlook for Teva Pharmaceutical Industries to an Outperform rating.

Teva's Copaxone

The invetsment bank's 12-month target price is $65, which is 20% higher than its current trading price. Teva yesterday closed trading on the Tel Aviv Stock Exchange with an 0.1% gain to NIS 204.70 per share, on turnover of NIS 123 million.

The Oppenheimer analysts based the recommendation on developments regarding the competitive market situation for Copaxone, a blockbuster proprietary drug for the treatment ofremitting/relapsing multiple sclerosis.

Teva faces potential challenges in this market from generic drug manufacturers and also from Gilenia, an orally administered drug being developed by Novartis. Copaxone, conversely, is administered by injection.

Last week a U.S. District Court denied a request by drug companies Sandoz and Momenta Pharmaceuticals for a summary judgment to invalidate Teva's Copaxone patents. Sandoz and Momenta, which are trying to develop generic alternatives to Copaxone, will now need to put their case through a full court trial in addition to overcoming the required technological and regulatory hurdles.

Oppenheimer analysts expect this to significantly reduce Teva's exposure to any generic competition before 2012.

Oppenheimer analysts also noted that Gilenia is expected to obtain approval from the U.S. Food and Drug Administration for marketing on September 21, and investors will need to watch developments to Copaxone's market share closely.

In their opinion, Copaxone will maintain its current 40% market share in treating multiple sclerosis and if anything, it could even increase in the short term. They expect Gilenia's penetration of the multiple sclerosis drug market to be slow and gradual and that it will be a second- or third-choice treatment, with physicians. Doctors will prefer to hold back to evaluate its effect and side effects, Oppenheimer predicts.

FDA reports have expressed concern about possible side effects and the need for further study. Meanwhile, it is likely that commercial use of Gilenia will be restricted.

Also contributing to Oppenheimer's optimistic outlook for Teva is its recent release of Effexor, a generic antidepressant. They expect sales for the drug to reach $650 million to $700 million in the second half of this year, adding a profit of 25 cents to 30 cents per share.

Gross profit margin for the product is expected to reach between 90% and 95%. Income from its sales will be exempt from tax, since it will be produced in a plant that the government considers a "preferred enterprise."