Morgan Stanley Cuts Teva's Price Target By 33%

Teva Pharmaceutical Industries Ltd (ADR) TEVA reported upbeat Q3 results, but reduced its guidance.

The company could face increased generic competition and worse Copaxone erosion in the US than was earlier anticipated, and management would likely lower its long-term guidance in early 2017, Morgan Stanley’s David Risinger said in a report.

Risinger downgraded the rating on the company from Overweight to Equal-weight, while reducing the price target from $63 to $42.

Competition From Generics

Teva’s performance could be impacted by increased commoditization of its existing revenues.

“We fear risks of greater competition over time as customers drive prices lower and FDA approves more generic competitors,” Risinger commented.

Launch Of Copaxone 3TW

Once Copaxone 3TW receives FDA approval, Sandoz-Momenta Pharmaceuticals, Inc. MNTA may not wait for an Appellate Court decision before launching this candidate, the analyst mentioned.

Estimates Reduced

Risinger reduced the estimate for revenue CAGR [Compound Annual Growth Rate] for 2017-2020 from 3 percent to 2 percent. The CAGR for adjusted EBITDA has been lowered from 6 percent to 3 percent, while and the EPS CAGR has been reduced from 7 percent to 5 percent.

“The revision was driven primarily by lower US generic growth expectation (from 5% to 3% 3-year CAGR) due to competition and worse US Copaxone erosion (from -25% to -27% CAGR).”

The analyst expects management to lower its full-year guidance in February 2017.