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Analysts Unenthusiastic Over Teva’s NTE Products

Teva sees $3 billion in potential sales by 2020 from 50 new therapeutic entities.
Ratiopharm Purchased By Teva News Conference
Dr. Michael Hayden
50 new products with $3 billion in potential sales in 2020 is the news delivered by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) in its webinar on Wednesday for the company’s new therapeutic entities (NTE) program.
It would be hard put to say that the market was enthusiastic: Teva’s share price fell 0.4% on the New York Stock Exchange to $40.03, giving a market cap of $33.8 billion.
The next trigger will be Teva’s publication of its guidance for 2014 on December 10. Teva’s NTE program is part of the strategy set by former CEO Dr. Jeremy Levin, and run by CSO Dr. Michael Hayden. The program includes current molecules in new formulations to improve a drug’s effectiveness or for new indications.
Teva currently has 15 products in development and plans to have 50 products in the coming years for the treatment of pain, Crohn’s disease, glaucoma, and other diseases. The NTE program’s advantage lies in its reduced risk and lower cost compared with the development of new drugs.

UBS analyst Marc Goodman entitled his report, “Wish We Were More Excited With NTEs, ” adding that the information provided was insufficient. “While many of the spec pharma products are interesting ideas, they are mostly ideas with minimal data to even know if we have real products, ” he says. “The good news is that expectations were low.” He reiterated his “Neutral” recommendation and $40 target price for Teva.

Barclays Capital analysts Douglas Tsao and Ann Trimble are unexcited, saying, “Yesterday’s presentation seemed to do little to convince investors these would be meaningful commercial opportunities.” They add, “Most disappointing to us is that the majority of the NTE candidates disclosed yesterday don’t appear to be particularly novel or innovative. Indeed, many appear to be ideas that have faced regulatory challenges in the past, such as the glaucoma product, or are already being pursued by many other companies, like the abuse deterrent opioids.” They reiterated their “Equal weight” recommendation with a target price of $42.

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Needham analyst Elliot Wilbur said that the NTE program was an attempt to offset the loss of revenue and profits from Copaxone, Teva’s best-selling drug, which will face generic competition in the coming years. Needham says that the projected $3 billion revenue from NTE was expected in 2020, while Copaxone’s profit would fall in the short term, which means that the NTE program does not allay fears about Copaxone.

Citi Research analyst Liav Abraham says that the market is undervaluing NTE products. “While the economics associated with the initiative are attractive, we acknowledge that the Street may remain skeptical until tangible evidence of execution becomes more evident, ” she says, forecasting $480 million in NTE sales in 2018, less than the $1-1.5 billion that Teva projects. “The NTE portfolio provides growing stream of modest revenue opportunities, ” she concludes. She gives Teva a “Buy” recommendation with a target price of $47.

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