Teva's 'Achievable' 2018 Outlook, Restructuring Plan Trigger Credit Suisse Upgrade

Teva Pharmaceutical Industries Ltd (ADR) TEVA announced a restructuring program late last year that is now showing some signs of early success, according to Credit Suisse.

The Analyst

Credit Suisse's Vamil Divan upgraded Teva's stock rating from Neutral to Outperform with a price target boosted from $20 to $23.

The Thesis

Teva's initial restructuring plan prompted Divan to upgrade Teva's stock rating from Underperform, but now that more details on the plan have been made, a bullish stance is warranted, he said. (See the analyst's track record here.) 

Teva's 2018 outlook looks "achievable," even though it includes the potential impact of a second generic Copaxone 40mg coming to the U.S. market in the coming months, Divan said. 

A potential delay to Teva's migraine therapy was "generally expected," but the market for migraine treatments is large enough for multiple blockbusters, even if Teva is fourth to the market, the analyst said. 

In addition, the Israel-based company's move to hire Kare Schultz as CEO is encouraging, as he boasts a "positive track record" of overseeing turnarounds at pharmaceutical giants, according to Credit Suisse. 

The generics industry as a whole is expected to see continued volatility, with stabilization in 2019 and beyond, Divan said. Teva's sell-off and business reset creates a reasonable near-term expectation that clears a path for upside in the stock, he said. 

Price Action

Shares of Teva were trading higher by 2.3 percent after the open Monday. 

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