UBS rates drug giant Teva Hold, setting price target at market level

Ahead of the release tomorrow of drug giant Teva Pharmaceuticals' (Nasdaq:TEVA) Q1 financial results, investment bank UBS Warburg has rated Teva a Hold, setting a $55 price target, a puny 1.5% above the market.

The bank estimates that Teva will post double-digit growth in the first quarter, and that earnings per share will rise to 52 cents, 30% above the same quarter in 2001. The estimate is 3 cents short of the average Wall Street estimate.

UBS expects $557 million revenue, which comes to 13% annual growth.

For the sake of investors, the bank hopes that in 2002 Teva will post growth. The bank said that given the anticipated launch of several generic drugs in 2003, its forecast capability for the coming year is higher than that for the remainder of 2002.

The bank estimates that the results for the first quarter will enable it to base its projections for the remainder of 2002, where visibility is lacking.

The results for the first quarter will provide preliminary data for revenue and profit margin following the entry of two rivals into the Nabumetone market, a generic drug where Teva had exclusivity. The drug is the generic version of the SmithKline Beecham drug Relafen, used for treating acute and chronic osteoarthritis and rheumatoid arthritis.

UBS believes that the two rivals are characterized by aggressive price strategy. Accordingly, the price of the drug and its profit margin are expected to be significantly hurt. The bank estimates that revenue from the drug will drop to $15 million to $20 million in the first quarter, compared with $40 million in the fourth quarter of 2001.