Teva's Weak Forecast Leads to Fair Value Estimate Cut

Even though not included in its guidance numbers, management anticipates that two generic Copaxone competitors could further reduce results by approximately $1.1 billion in revenue and $0.65-$0.80 in EPS, which we originally anticipated could be partially offset by earnings and synergies from the generics business. New generic drug launches don't look sufficient to offset recent increased competition in the generics industry along with new competitors on high-margin products like generic Concerta. Teva’s large first-to-file pipeline and anti-CGRP drug candidate for chronic migraine in phase 3 trials represent positives, but we plan to review our moat rating as headwinds in the volatile generics industry and the recent Actavis purchase put greater pressure on returns on capital.

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