Despite last week’s tepid second quarter financials, analysts see an upside in the sharee price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) and are more concerned about the continuing legal saga of the opioid settlement that the Israeli company is negotiating.
Leumi Partners pharma analyst Merav Fischer-Sharoni said, “Progress with other companies demonstrates a readiness by the prosecutors to reach a settlement and end the affair. The uncertainty surrounding the issue has very much weighed on Teva’s share over the past two years, mainly over concerns that a heavy fine will be imposed, which would blight management of the company due to its apparently fragile financial situation. As of today, it is very difficult to assess how the affair will end for Teva and what will be the consequences.”
She said that although Teva continues to stabilize from a financial point of view, the risks are still high and there is genuine uncertainty about development in the legal arena. Despite this, in her estimation the prolongation of the legal proceedings supports the company’s ability to improve its situation by creating free cash flow of more than $2 billion per year. Due to the uncertainty she gives a “hold” recommendation for Teva, with a price target of $12.50, nearly 30% above Friday’s closing price on Wall Street.
Bank Hapoalim research division analyst Yaron Friedman said, “The tepid second quarter results and the lowering of expectations for the rest of the year go together with Teva share’s weakness in recent months.” He sees the weakness being mainly from concerns about the opioids affair and less from the financial performance. He feels that the lowering of guidance is not dramatic and Teva remains on track with its slow but consistent business improvement, handling of its debt and stabilization and even returning to modest growth.
Friedman added, “The company continues to handle the debt issue resolutely and only several days ago repaid a $1.5 billion bond series and it is expected to repay another $1.1 billion this November. The company will have repayments of about $2.1 billion in 2022, which in our estimation it will be able to repay from routine cash flow from internal sources.”
Goldman Sachs analysts Nathan Rich and Lindsay Golub attribute the rise in Teva’s share price following last week’s second quarter results to the issue of the opioids because the company believes that the settlement that will eventually be signed won’t differ from the outline structure from 2019 (which included contributing treatments worth $23 billion over 10 years plus $250 million in cash). “Management has said that it will agree to increase the cash component in exchange for extending the period for the payments and also expects that other defendants will join the settlement in order to avoid legal costs.”
Teva CFO hopes for growth in 2022
Goldman Sachs leaves Teva’s recommendation as “Neutral” with a target price of $11, 14% above Friday’s closing price on Wall Street.
Published by Globes, Israel business news – en.globes.co.il – on August 1, 2021
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