Omer regev
15/09/2016
SUMMARY
Teva held an Investor Day that focused on the current state of its global generics business with a post-integrated Actavis. Management highlighted Teva's "secret sauce" or keys to the continued success of its generics business: 1) maintain marketleading positions in key markets, 2) continue to develop its R&D pipeline, and 3) maintain a competitive operational network. Main watch item will be whether or not the company can deliver on its stated goal of 10% annual growth (~1,500 products in 2017) to overcome ~5% erosion. Despite the new formidable capabilities and promising pipeline on the generics side, we believe the focus for Teva shares still remains on the specialty side with the upcoming District Court ruling on the Copaxone patents (likely in early 2017).
KEY POINTS
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Generics Business: TEVA reaffirmed the key strategies differentiating the company from competitors, including: 1) portfolio diversification; 2) differentiated product offering; 3) competitive cost position; and 4) extensive R&D pipeline. Management continued to downplay any notion of severe price erosion in the generics industry, while also attributing the recent pharma pricing concerns to election year chatter.
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US Generics: TEVA has >300 ANDAs (with >100 confirmed FTFs) pending at the FDA. Management noted that a "majority" of these applications are first-wave opportunities. Because the FDA has specifically placed a priority on first generic submissions, management believes the GDUFA goals will actually benefit TEVA. We note that TEVA currently has four of the 62 First-Time Generic Drug Approvals in 2016.
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Generic EpiPen: TEVA expects to meet shortly with the agency regarding its generic EpiPen and continues to forecast a late 2017/early 2018 launch. In light of recent negative headlines surrounding Mylan's EpiPen price increases, we believe a response from the FDA will likely come sooner than later. Recall that Antares Pharma is set to receive royalties from TEVA on sales of generic EpiPen.
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Pipeline: TEVA expects to file 68 ANDAs in the US in 2016 (vs. 65 filings in 2015). Additionally, management estimates that it currently has 13 of the 27 FTFs at FDA in 2016 (vs. 25 of a total 58 FTFs in 2015). Last, TEVA's US generics pipeline currently has ~645 products with an estimated potential value of ~$200B.
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Model Changes: We are not changing our estimates at this time. Our 2016/2017 revenue estimates remain $22.0B/$25.9B (vs. guidance of $22.0-22.5B for 2016 and $25.2-26.2B for 2017). Our 2016/2017 adj. EPS estimates remain $5.20/ $6.01 (vs. guidance of $5.20-5.40 for 2016 and $6.00-6.50 for 2017). We maintain our Outperform rating.
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