Teva Pharmaceutical Industries Ltd. (TEVA:US), the world’s largest maker of generic drugs, posted the biggest weekly gain since 2008 as a surge in health-care industry deals spurred speculation the company may be acquired.
Shares of the Petach Tikva, Israel-based company advanced 9.6 percent last week to $48.45, the most since October 2008. Trading volume in the week was 62 percent higher than the 12-month average, data compiled by Bloomberg show. The Tel Aviv stock fell 0.6 percent to 168.4 shekels, or $48.07, at today’s close in Tel Aviv as the benchmark TA-25 Index (TA-25) declined 0.2 percent.
Actavis Plc agreed last week to buy Forest Laboratories Inc. for about $25 billion, raising the tally of pharmaceutical and biotechnology deals in the past 12 months to about $110 billion, the most since 2009. The buyout is boosting prospects that Teva could be acquired next, Maxim Group LLC said. Teva, the largest stock holding in George Soros’s fund, appointed a new chief executive officer, pledged to overhaul its board and cut costs last month as cheaper versions of its multiple sclerosis drug threaten to cut into its market share.
“What you’re seeing is the company being revalued on the fact that there’s a new CEO, the board will become smaller and more strategically focused, and they will deliver cost savings,” said Jason Kolbert, a biotechnology analyst at Maxim in New York, said Feb. 21. “That combined with the M&A activity is causing a revaluation in Teva.”
Denise Bradley, a spokeswoman for Teva in North Wales, Pennsylvania, said the company doesn’t comment on market rumors.
Speculation is mounting that other drug companies will follow Actavis because they need to make acquisitions to grow and because Teva’s valuation is attractive, Kolbert said.
Teva trades at 10.9 times estimated earnings, the second-lowest valuation (TEVA:US) among 11 global generics makers tracked by Bloomberg and a 42 percent discount to the average.
“You have four large players and Teva is one of them. The thinking is that that could shrink down to three players at some point,” Kevin Kedra, a health-care analyst at Rye, New York-based Gabelli & Co., said in a Feb. 21 telephone interview. “Whether it’s a buyer or a seller, consolidation is usually pretty good for a stock.”
Shares of Parsippany, New Jersey-based Actavis jumped 14 percent last week, the most since October 2008. Mylan Inc., based in Canonsburg, Pennsylvania, and Sandoz AG, a unit of Basel-based Novartis AG, are the other two pharmaceutical companies considered ripe for consolidation, Kedra said.
Teva will shrink the size of its board and work to boost the number of directors with global pharmaceutical experience, the company said in a Jan. 22 statement. New CEO Erez Vigodman is streamlining operations to boost earnings amid setbacks for the company’s multiple-sclerosis treatments.
The company said last month it won U.S. approval for a longer-acting version of MS treatment Copaxone, bolstering efforts to defend its best-selling product which analysts say contributes to more than 50 percent of profit. It also won the backing of a European Medicines Agency committee on Feb. 21 for a new version of lung therapy Symbicort, paving the way for competition to one of London-based AstraZeneca Plc’s best-selling drugs.
Soros Fund Management LLC, the family office of billionaire Soros, boosted its stake in Teva, according to a filing with the U.S. Securities and Exchange Commission on Feb. 14, making the Israeli drugmaker its largest holding in the fourth quarter. Teva’s fourth-quarter earnings climbed 5.5 percent, beating analyst estimates, as sales of the Treanda cancer treatment rose, the company said Feb. 6.
“People are saying, ‘Look at everything Teva has to offer,’” Kolbert said. “Here’s a global company that’s got a great generic business, that’s a low cost provider, very efficiently run, and on top of it they have a pipeline” of new drugs.
The Bloomberg Israel-US gauge rose to 114.11 last week, extending this year’s advance to 2.6 percent. That compares with a 0.4 percent slump for the TA-25 gauge.
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