Merrill Lynch says that investors are already assuming a Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) defeat in upcoming studies on oral treatments for multiple sclerosis, and that Biogen Idec Inc. (Nasdaq: BIIB) will win. The analysts reiterate their "Buy" recommendation with a target price of $58.
Teva is scheduled to announce results of its Bravo study of Laquinimod and Biogen is due to announce results of its Confirm study of BG-12. Merrill Lynch analysts Gregg Gilbert, Haim Israel, and Sumant Kulkarni note that since the AAN meeting in April Teva shares are down, while BIIB shares have soared over 25%.
The analysts say, "Simplistically, this tells us that investors are convinced that laquinimod data will disappoint, while BG-12 will excite. History tells us that clinical study results rarely lead to clear “black-or-white” conclusions. We like the risk/reward for Teva shares ahead of these events, as anything other than failure of laquinimod vs. placebo/ Avonex, and perfection for BG-12, could spark a rally for Teva."
The analysts continue to model zero sales for laquinimod and “hit” Copaxone for brands starting in 2011 and generics in 2013, which they view as potentially overly conservative assumptions.
The analysts predict that Teva will report earnings per share of $4.95 in 2011 and $5.66 in 2012, a 14.3% increase.
Teva's share price rose 1% on Nasdaq yesterday to $49.65, giving a market cap of $46.65 billion and rose 1% by mid-afternoon to NIS 168.70 on the TASE today.
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