Market Overview

RBC Says Stay Away From Mylan, Perrigo; Go Long Teva, Allergan

Share:

RBC Capital Markets released a new report this week detailing its updated take on the specialty pharmaceuticals sector following the announcement of Teva Pharmaceuticals (NYSE: TEVA)’s buyout of Allergan Plc (NYSE: AGN). Analyst Randall Stanicky revisited several companies in the sector based on the information presented in conference calls and the deal’s analyst event.

Positive Outlook For Teva

RBC is now projecting proforma earnings per share (EPS) of $5.88, $6.55 and $7.18 from Teva in 2016, 2017 and 2018, respectively. Stanicky believes that Allergan’s generics business will provide diversification for Teva and help bridge the gap to a future potential Teva growth.

Positive Outlook For Allergan

Stanicky believes that Allergan could have access to about $36 billion in capital from the Teva deal as soon as Q1 2016.

“A simple $36 billion debt reduction (total existing ~$45 billion) would add back ~$2.50 in EPS (14.5x 2017E) or if deployed to repurchases of 109 million shares ~$7.00 in EPS (12.1x 2017E),” he wrote. However, Stanicky believes that the most likely scenario involves Allergan using a large portion of the capital for M&A, possibly a large “transformative deal.”

Stock Picks

RBC is not confident that the proposed deal between Mylan NV (NASDAQ: MYL) and Perrigo Company Public Limited Co (NYSE: PRGO) will happen, and advises investors not to chase the stocks at premium prices.

On the other hand, none of the recent M&A news and speculation has impacted RBC’s view on its top pick in the space, Endo International Plc (NASDAQ: ENDP). Endo’s high exposure to the U.S. generics market continues to make the stock RBC’s top pharma stock to buy.

Latest Ratings for TEVA

DateFirmActionFromTo
Nov 2019UpgradesUnderweightNeutral
Nov 2019MaintainsNeutral
Oct 2019UpgradesHoldBuy

View More Analyst Ratings for TEVA
View the Latest Analyst Ratings

Posted-In: Randall Stanicky RBC Capital MarketsAnalyst Color Biotech Analyst Ratings General

 

Related Articles (ENDP + AGN)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
TORCCantor FitzgeraldDowngrades3.0
CIDMCanaccord GenuityMaintains1.5
TDGCanaccord GenuityMaintains620.0
DLPNCanaccord GenuityMaintains1.6
WBCLSADowngrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

Bank Of America Downgrades Stillwater Mining To Underperform: Here's Why

Oppenheimer Upgrades FireEye On 'Clearer Path To Profitability'