In a research update titled "A twist in the Augmentin tale", Goldman Sachs reiterated a > Market Performer rating for

Teva Pharmaceuticals

(Nasdaq:

TEVA

) and noted that it could suffer from pressure after its 7% climb from mid-July.

"(We) believe that it will continue to outperform in the medium-to-longer term," write analysts Vikram Sahu, Shimon Levy and Mark Tracey, based on its stuffed pipeline, "strong positioning and impressive track record". But there are chances of profit taking and, of course, the market awaits developments regarding Augmentin, an antibiotic that GlaxoSmithKline is frantically trying to protect despite the expiry of its patents.

While appealing to get its patents restored, Glaxo has accused Teva, among others, of using stolen bacteria to manufacture generic Augmentin. Teva called the accusation a non-issue.

Unless Teva gets the U.S. Food and Drug Administration nod to market the drug within a month and a half, investors could be disappointed, Goldman Sachs says, even though it has not been factored into Teva's guidance.

Investors hope Teva can begin selling Augmentin in the third quarter, although the the Israeli drugmaker has cautioned that it is not including sales of the drug in its 2002 projections at all.

The analysts concur that Teva's relatively high premium, compared with peers, is justifiable. "Teva is trading at 21 times estimated 2003 earnings per share," the analysts write, while peers are trading at 15 times 2003 EPS. But the company's total offering justifies that valuation, they conclude.

The proprietary version of Augmentin commands a market of about $2.1 billion a year. Teva will be competing with several other generic pharmas over that market, including India's Renbaxy, and Novartis.