Analyst Says Teva Is 'Plagued With Problems,' Downgrades On Challenging Outlook

Shares of Teva Pharmaceutical Industries Ltd (ADR) (NYSE: TEVA) have lost 30 percent in the last six months and are currently trading close to 10-year lows. However, a turnaround in shares is unlikely until there are “signs of potential growth or a clearer strategy from the new management team,” Argus’s John Eade wrote in a report.

Eade downgraded the rating on Teva from Buy to Hold, citing a “challenging outlook.” He added that there were other segments of the healthcare industry that offered “better growth prospects at reasonable valuations.”

Challenging Outlook

Eade commented that the company was “plagued with problems,” while citing the following:

• Pricing erosion in the generics space.
• A Department of Justice investigation.
• A shakeup in the executive suite.
• A host of upcoming debt maturities following the Actavis generics purchase.
• Challenging integration of the Actavis generics business.
• Competition for Copaxone.

Related Link: Risks For Teva Remain As CEO Search Continues

Teva’s shares have been under pressure partly due to headwinds in the generics pharmaceutical industry, the analyst noted. He added, “Pharmaceutical distributors in our coverage universe forecast generics price erosion of 7–10 percent in 2017, which will shrink margins for both distributors and manufacturers.”

Although Teva could grow through M&A, there would be antitrust hurdles, Eade mentioned. Moreover, following the acquisition of the Actavis generics business, “there are few (if any) attractive large targets.”