Bloomberg News

Citigroup’s Buy Teva Call Narrows Widest Tel Aviv Discount

October 27, 2013

Teva Pharmaceutical Factory

An employee works with sterile products inside Teva Pharmaceutical Industries Ltd.'s factory in Godollo, Hungary. Photographer: Akos Stiller/Bloomberg

Teva Pharmaceutical Industries Ltd. (TEVA), the world’s largest maker of generic drugs, rallied in Tel Aviv and narrowed the widest discount to its New York-traded shares in five months as Citigroup Inc. (C:US) recommended buying the stock.

Shares of the Petach Tikva, Israel-based company climbed 3.1 percent to 146.30 shekels, or $41.45, at the close in Tel Aviv. The American depositary receipts closed at $41.70 on Oct. 25 in New York. The Bloomberg Israel-US Equity Index of the most-traded Israeli companies in the U.S. gained 1.1 percent to 102.15 for the week, led by ClickSoftware Technologies Ltd. (CKSW:US)

Teva has tumbled 35 percent from its March 2010 peak in New York as a patent protecting best-selling medicine Copaxone nears expiration. The decline sent its valuation to about 8 times estimated earnings, or less than half of the multiple of global peers, according to data compiled by Bloomberg. To grapple with an expected drop in sales of its $4 billion injection, the company announced plans this month to cut 5,000 jobs to save $2 billion in annual costs by 2017.

“The shares are undervalued,” Timothy Chiang, an analyst at CRT Capital Group LLC, said by phone from Stamford, Connecticut on Oct. 25. The cost-cutting strategy “has signaled a greater sense of urgency that they are trying to align their cost structure with the potential for Copaxone” losing its patent protection next year, he said.

Generic drugmakers including Momenta Pharmaceuticals Inc. (MNTA:US) are seeking to introduce copies of Copaxone as early as next year after a U.S. court in July invalidated a 2015 patent for the injection. Weston, Massachusetts-based Biogen Idec Inc. (BIIB:US) won FDA approval in March for Tecfidera, which analysts project may draw more than $3.5 billion in annual revenue by 2017.

Teva’s Sales

Sales at Teva rose 0.2 percent to $4.98 billion in the third quarter, the first increase in a year, according to the average estimate of 10 analysts tracked by Bloomberg. The company is scheduled to report earnings Oct. 31.

“Teva’s risk-reward profile is the most attractive of the multinational generic companies, and not reflected in the current valuation,” Liav Abraham, an analyst at Citigroup, wrote in an Oct. 25 report. “We see the potential for value to be unlocked over the next 12 months as investors look past the Copaxone cliff. We also see the potential for material upside from potential shareholder-friendly actions on the part of management.”

Perrigo Co. (PRGO:US), an Allegan, Michigan-based drugmaker, shares advanced today in Tel Aviv, gaining 1.7 percent to 463 shekels, or $131.19. The New York shares dropped 1.5 percent last week to $130.61, the most since Aug. 16.

AudioCodes Ltd. (AUDC:US), the Lod, Israel-based company whose Internet calling technology is used by Microsoft Corp., gained 5.4 percent to 25.52 shekels, or $7.23, in Tel Aviv. The New York shares added 4.3 percent to $7.25 on Oct. 24, trading at a 39 cent premium to Tel Aviv, the widest since Sept. 27.

Compugen dropped 2.8 percent to 36.68 shekels, or $10.39, in Tel Aviv. The New York shares of the Israeli biotechnology company, fell 6.9 percent last week to $10.32 to trade at a 37 cent discount to Tel Aviv, the biggest among shares traded on both exchanges.

To contact the reporter on this story: Matthew Kanterman in New York at mkanterman2@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net


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Companies Mentioned

  • C
    (Citigroup Inc)
    • $51.67 USD
    • 0.97
    • 1.88%
  • CKSW
    (ClickSoftware Technologies Ltd)
    • $7.16 USD
    • 0.39
    • 5.45%
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