Wall Street Has Mixed Reviews For The Teva-Auspex Merger

On March 30, Teva Pharmaceutical Industries Ltd TEVA announced they will be acquiring Auspex Pharmaceuticals Inc ASPX in an all-cash transaction valued at $3.2 billion, or $101 per Auspex share. Teva stated that Auspex’s portfolio of movement disorder treatments will help bolster their core nervous system franchise.

Teva is the world’s largest producer of generic drugs and looks forward to adding SD-809, Auspex’s leading pipeline drug, to their portfolio. SD-809 will be used to treat involuntary movement disorders such as Huntington’s disease and Tourette Syndrome. SD-809 is expected to be launched commercially in 2016.

Teva CEO Erex Vigodman commented, “One of our key priorities for 2015 is to support Teva’s mid to long-term growth and create value for our shareholders with business development opportunities that are closely aligned with our core therapeutic areas. This transaction represents a first major step with regards to that commitment and we expect to continue this focus in the future.”

The acquisition comes after rumors that Teva was in talks to acquire Mylan N.V., another generic drug maker. These rumors were quickly dispelled but showcased investors’ eagerness for a merger.

Related Link: And The Winner From The Mylan-Perrigo Merger Is... Teva?

In other news, Teva’s ProAir RespiClick inhaler received FDA approval on April 1. The inhaler is expected to be available in the U.S. in the second quarter of 2015.

On April 8, analyst Ronnie Moas of Standpoint Research downgraded Teva from a Buy to a Hold with an unchanged price target of $78. Moas said he added Teva to his portfolio when “the market collapsed on October 14/15 and broke below 1900.” Since then, the market “crossed 2000 and went from fairly valued to overvalued.”

Now, Moas commented that Teva is “fairly valued” but downgraded the stock “given the recent absolute (35 percent) and relative (2500 bps vs the S&P) move since mid-October” following the all-time high.

Ronnie Moas has a 75 percent overall success rate recommending stocks with a +9.5 percent average return per recommendation.

Separately on April 7, analyst Douglas Tsao of Barclay’s reiterated his Overweight rating on Teva and raised his price target from $70 to $75. Tsao anticipates “consolidation in the generic marketplace, especially given Teva’s stating its willingness to accelerate the process through a ‘transformative’ acquisition.” The analyst raised his price target because “Teva offers evidence EPS growth through capital deployment, evidenced by last week’s acquisition of ASPX.”

Douglas Tsao has an 89 percent overall success rate recommending stocks with a +33.5 percent average return per rating.

On average, the top analyst consensus for Teva on TipRanks is Hold.