Jefferies Warns Of 'Too Many Headwinds' For Teva

Teva Pharmaceutical Industries Ltd (ADR) TEVA reduced its Q4 and FY 2016 outlook. This could be an indication of greater weakness in generics in 2017 and an increased chance of the 40mg Copaxone generic being launched, Jefferies’ David Steinberg said in a report.

Steinberg downgraded the rating on the company from Buy to Hold, while reducing the price target from $69 to $40.

Generic Weakness

Management reduced its FY 2016 revenue guidance by $400 million–$600 million, mainly to reflect delays in the approval of three or four key generic products. The company lowered its FY 2016 EPS from $5.20–$5.40 to $5.10–$5.20.

“If one annualizes the expected Q4 generic segment run rate of $3.11 billion–$3.14 billion, it is far short of our prior $14.5 billion est in generic revs for FY17,” Steinberg pointed out.

Increasing Headwinds

Copaxone generic could enter the U.S. market in the back half of 2018. The analyst lowered the estimated U.S. Copaxone sales for FY 2019, 2020 and 2021 from $2.3 billion to $1.7 billion, from $2.1 billion to $1.4 billion and from $1.9 billion to $1.2 billion, respectively.

“That said, it is not out of the realm of possibility that generic competition could emerge as early as 2017 if the District Court rules in favor of Sandoz, assuming the generic is approved,” Steinberg added.