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Analyst Bullish on Teva Pharmaceutical Industries Ltd. (ADR) (TEVA) Following Acquisition

By Kate George

Teva Pharmaceutical Industries Ltd. (ADR) (NYSE:TEVA) has recently been in news for its announcement to acquire Gecko Health Innovations, a privately-held smart inhaler company. Shortly after, Teva announced the $2.3 billion acquisition of Rimsa, a Mexican drug maker.

Last week, analyst Tim Chiang from BTIG weighed in on the pharmaceutical company. Chiang maintained a Buy rating for Teva’s stock with a price target of $77. He sees the recent weaknesses in the stock as a buying opportunity because of the strong valuation of the company.

Referring to Teva’s acquisition of Rimsa, he estimates Teva is paying approximately 10x trailing 2014 sales. He added that while the deal will not generate any EPS accretion untll Q1 2014, he sees the purchase as a good tuck-in acquisition. Chiang says, “We believe Rimsa’s products have higher than average gross margins (more in line with specialty products; we est. in the ~70 to 80% range).”

Chiang shared some details on Teva’s other pending acquisition; the $40 billion purchase of the generic segment of Allergen, which is expected to close in Q1 2016. This purchase will be financed by nearly $34 billion of committed bridge financing at interest rates of nearly 1.25% to 1.5%. Additionally, Chiang talked about Teva’s plans of issuing 200 to 210 million shares; he estimates this issue to increase Teva’s share count to nearly 1.056 billion, from 852 million currently.

Tim Chiang has a 66% overall success rate recommending stocks with a +16.5% average return per rating when measured over a one-year horizon and no benchmark.

Of all the analysts who have recently rated Teva Pharmaceuticals, a majority of them share Chiang’s views. Based on TipRanks’ statistics, out of 15 analysts who have rated the stock in the last 3 months, 13 have rated it as a Buy and 2 have rated it as a Hold. None of the analysts have recommended to sell Teva’s stock. The average 12-month price target for the stock is $79.43, a nearly 32% upside from current levels.