Morgan Stanley Resumes Teva At Overweight, Sees Large EPS Growth Coming

In a report published Wednesday, Morgan Stanley analyst David Risinger resumed coverage of

with an Overweight rating and a price target of $85. Analyst David Risinger pointed out that Teva was poised for robust growth with the acquisition of the generic business of

. The acquisition is expected to boost Teva's EPS CAGR for 2016-2020 from 4 percent to 11 percent. Teva's CEO Erez Vigodman is "leading a compelling turnaround," Risinger said, while adding that the company's branded pipeline should offset "Copaxone pressures." In the report Morgan Stanley noted, "Post-deal, Teva's leading scale and breadth should be a significant advantage in the increasingly consolidated purchaser landscape." "The combined entity has a compelling strong generics pipeline, including ~320 pending US generic applications with ~110 first-to-files. We project cost savings of $1.6B, slightly above mgmt guidance of $1.4B," the report added. Teva's pipeline includes several call options including the novel migraine drug, which is expected to generate over $1 billion in global sales. Another strong drug candidate is TEV-48125, which met all efficacy endpoints in both chronic and episodic migraine trials. Risinger commented that, assuming Phase 3 is successful, the company should file for approval in 2017 and then launch it in 2018. "Even if Teva only achieves half of its $4.9B specialty revenue target for 2019 it would largely offset '17E Copaxone of $3B," Risinger said.