Teva Pharmaceuticals

(Nasdaq:TEVA) has established itself as a leading global generic drug company, growing organically and through strategic acquisitions, Merrill Lynch begins its latest report on Teva.

The report was in all likelihood written to calm Teva investors, who have lost about 30% of the value of their positions this year. The stock was going for $70 at around December 2000. It's down to $53.

Paul Woodhouse reiterates his Buy recommendation and target price of $80 a share. He says the recent losses on the stock reflect the general uncertainty regarding recent developments in the Middle East. Practically speaking, he says, Teva is not affected by those developments. He also blames the general feeling on Wall Street that is reacting to the change of the economic cycle.

Woodhouse expects the United States generic drug market to reach $25 billion in 2005, implying a sector annual growth of 15%. The growth for the U.S. drug market in general will reach only 9%, he said. Teva, which grew substantially more than the industry last year, is going to significantly benefit from this trend.

The company's strong hold in the American generic drug market with 150 individual products, and in the European market with 270 separate drugs, increases its chances for swift growth.

Teva's proprietary drug Copaxone, used in the treatment of multiple sclerosis, has a market of about $250 million a year. Sales are expected to grow to $650 million in 2004. Copaxone is the second most commonly used drug for MS treatment, and is growing the fastest.

Impressed with growing demand for Copaxone, Woodhouse predicts that by 2001 the drug will command 30% of U.S. market share. The oral version of the drug and its entry into Europe are additional factors contributing to its growth potential.

Merrill Lynch expects Teva per share earnings to grow 22% annually until 2004, a relatively high growth rate for the industry.