Teva's Litigation Risks Weigh Against Stabilizing Fundamentals, Analyst Says

Teva Pharmaceutical Industries Ltd TEVA reported strong quarterly results, prompting an analyst at Barclays to upgrade the stock.

The Teva Analyst: Balaji Prasad upgraded Teva from Underweight to Equal-Weight and increased the price target from $10 to $13.

The Teva Thesis: Teva reported in-line second-quarter results and reiterated its fiscal year revenue and EPS guidance.

Among other things, Ajovy auto-injector saw an improvement in prescription trends and the company has laid long-term growth foundation with the Alvotech biosimilar partnership for five U.S. biosimilar candidates, which represented about $35 billion in innovator sales, the analyst noted.

Among Prasad's key takeaways are:

• Positive prospects for Ajovy in both the U.S. and outside of the U.S.
• Austedo sales on track to meet fiscal year 2020 target
• Copaxone sales beating expectations
• Stable free cash flow
• Execution on long-term targets

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Teva's 2023 financial goals of more than 80% cash conversion and 28% EBIT margins are achievable and sustainable, according to the analyst.

"While we are cautious on potential legal risks arising from Opioid litigations and Gx Price Fixing cases, we acknowledge the stabilizing fundamentals, improving FCF Generation and reduced leverage profile," Prasat said in the note.

TEVA Price Action: Teva shares were sliding 3.6% to $12.20, surrendering some of their 7.3% earnings-induced gains made Wednesday.