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Merrill Lynch analyst Paul Woodhouse sees the generic version of Augmentin, a penicillin antibiotic, contributing no less than 25 to 30 cents per share to

Teva Pharmaceuticals

(TASE, Nasdaq:



His research note follows the announcement that Indian drugmaker Ranbaxy Laboratories (OTC:RBXZF.PK) received U.S. Food and Drug Administration approval to market generic Augmentin, while Teva still awaits the FDA okay.

Woodhouse maintained a Buy rating for the Israeli drugmaker, and 12-month price target of $80 some 17% above its current market level.

Ranbaxy received its approval earlier than expected, Woodhouse says. It joins Geneva, a division of Novartis (NYSE:NVS), which received approval to sell the drug in the United States two months ago.

The Ranbaxy development is disappointing for Teva, Woodhouse acknowledges, but does not fundamentally change the situation, as Ranbaxy is still sitting on plans to launch amoxicillin clavulanate potassium, the generic version of Augmentin.

Merrill Lynch sees Teva receiving its approval in mid-October at the latest, which would enable it to sell during the winter season.

Geneva has managed to nab a 40% share of the Augmentin prescriptions market, Woodhouse said. Its generic version costs some 35% less than the original drug, which is made by GlaxoSmithKline (LSE:GSK). But he sees room for Teva to elbow into the market and obtain a substantial piece of the pie, thanks to production limitations of its rivals and the dynamics surrounding the treatment's price.

GlaxoSmithKline's brand drug generates more than $2 billion sales a year. It is commonly used to treat bacterial infections of the ear, nose and throat, the pulmonary system, the bladder, gonorrhea, and skin infections.

Woodhouse sees a fourth competitor over Augmentin Lek Pharmaceuticals, a Slovenian company traded on the Slovenian exchange under the symbol LEKA, and which is slated to receive FDA approval by year-end. Novartis agreed to buy Lek, which also makes generic drugs, for almost $800 million cash.

Ultimately Woodhouse foresees generic augmentin becoming Teva's biggest generic product, from the perspective of sales, and contributing at least 25 to 30 cents per share to Teva's net per year. It has the potential to reach 50 cents per share a year, he adds.

However, for now Woodhouse is not incorporating Augmentin into his 2002 and 2003 calculations for Teva. He sees the company's third-quarter revenues at $579 million, lifting revenues for the year 2002 to $2.34 billion. The company's net in this year should be $372 million, he estimates.