Bullish on Teva Pharmaceuticals

We are maintaining our Buy rating on Teva Pharmaceuticals, Inc. (TEVA - Analyst Report) with a price target of $52. We are impressed with the company's strong performance in 2008 despite the global slowdown. We are optimistic on the company's growth prospects, and we expect Teva to continue posting strong revenues and earnings going forward.

The company expects to post earnings in the range of $3.20 - $3.40 per ADS on revenues of $14.1 - $14.6 billion. We believe the guidance is achievable, and are modeling EPADS of $3.29 on revenues of $14.2 billion. New product launches, both generic and branded, and continued strong performance of existing products should help boost sales in the coming quarters. Several branded products are scheduled to go off-patent in 2009 - 2010, and this provides significant commercial opportunity to the company.

We are also pleased to see Teva's progress with its branded pipeline. The company has about 8-10 products in different stages of clinical development. Besides this, Teva is working on building its biogenerics pipeline, which should help drive long-term growth at the company.

Meanwhile, we view the recent acquisition of Barr Pharma as a smart move -- the acquisition should help Teva strengthen its position in the U.S. and expand its presence in Europe. The company expects to achieve cost synergies of more than $400 million from the Barr acquisition in 2011, up from the previously guided $300 million.

We believe that the current share price represents an attractive entry point for long-term investors. Based on our model, we see the company delivering top-line CAGR of 14% and bottom-line CAGR of 16% over the next 5 years. We recommend purchase up to $52.  Our target price is based on 15.8x our 2009 EPADS estimate of $3.29.

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