Market Overview

Jefferies Weighs In On Specialty Pharmaceuticals After Management Meetings, Raises Price Targets On 5 Stocks


Over the past week, analysts at  Jefferies have been holding meetings with senior executives from 29 specialty pharmaceutical (21 branded, eight generic) companies. Following the discussions, here are the main takeaways.

Following its busiest year ever for acquisitions, the industry will maintain a major focus on M&A in 2015. Due to the high asset prices, “companies are seeking ‘under the radar’ assets such as private organizations or simply buying leverageable products vs companies.”

Smaller companies will still target tax inversions although larger peers’ interest has generally decreased following the Treasury’s rules changes last year.

The new GDUFA rules enacted last year have notably increased the costs of filing an ANDA, but approval timelines have not fallen.

“Branded prescription pricing trends are expected to remain robust –with 10%+ annual price increases seemingly the new norm across many drug classes. For generics, most participants continue to believe there is still substantial pricing power for selected products.”

In addition to this general view, the report commented on some particular stocks.

Teva Pharmaceutical Industries Ltd's (NYSE: TEVA) price target was boosted from $64 to $65. This was “determined by rolling forward our [the firm’s] valuation to reflect the start of FY15.”

Shire PLC (ADR) (NASDAQ: SHPG) also saw its price target climb, from $228 to $247, determined also by rolling forward the valuation.

Akorn, Inc. (NASDAQ: AKRX) witnessed an upsurge in its price target, from $44 to $49.

Salix Pharmaceuticals, Ltd.'s (NASDAQ: SLXP) target was increased from $123 to $138. The figure was obtained by “applying an increased 16.2x multiple (10% discount to ~18% forecasted EPS growth) to our [Jefferies’] FY16 EPS estimate of $8.77 (unchanged).”

XenoPort, Inc. (NASDAQ: XNPT) was the last company in this list. The price target was boosted by 50 percent, to $12. Jefferies explained that they calculated this “by applying an unchanged 30x multiple to our [the firm’s] same FY21 EPS estimate of $1.19. We [Jefferies] have reduced the discount rate from 30% to 25%, given stellar Horizant trends and its seemingly durable revenue potential and we roll forward our discounting period to five years instead of 5.5 years to reflect the start of FY15.”

Latest Ratings for TEVA

Apr 2019MaintainsBuyBuy
Apr 2019MaintainsMarket PerformMarket Perform
Mar 2019Initiates Coverage OnMarket Perform

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Posted-In: GDUFA Horizant JefferiesAnalyst Color Health Care Price Target Analyst Ratings General


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