Teva Tumbles on Morgan Stanley Doubts: Israel Overnight

Teva Pharmaceutical Industries Ltd. (TEVA) dropped to the lowest level this year in New York after Morgan Stanley said the Israeli company is losing its share of the U.S. generic drug market.

American depositary receipts of Teva, the world’s largest maker of generic drugs, slumped 1.5 percent to $38.58 in New York yesterday, the lowest since Nov. 29. Teva’s Israeli shares rose 0.5 percent to 150.2 shekels, or the equivalent of $39 at 10:31 a.m. in Tel Aviv. The Bloomberg Israel-US Equity Index (ISRA25BN) of the most-traded Israeli companies in New York retreated 0.7 percent to 81.85. Partner Communications Co. (PTNR) fell to the lowest in almost nine years in the U.S. after first-quarter profit tumbled 43 percent.

Teva, which reported first-quarter sales that missed analysts’ estimates, is lagging behind competitors Mylan Inc. and Watson (WPI) Pharmaceuticals Inc. this year as Jeremy Levin, a former Bristol-Myers Squibb Co. executive, replaced Shlomo Yanai this month as chief executive officer. The company’s share of generic drug sales in the U.S. fell to 14 percent in the 12 months ended March 31, compared with 21 percent in 2010, according to Morgan Stanley.

“What’s really spooked the market is that you have new management, they didn’t provide guidance and now you see their generic sales are down,” Richard Gussow, senior analyst at DS Securities & Investments, said by phone from Tel Aviv yesterday. “This is another layer of uncertainty and investors don’t like uncertainty.’

Phone calls and an e-mailed message to Teva’s press office seeking comment on the company’s generic business were not immediately returned yesterday.

Consolidation

Teva’s generic drug sales are down 25 percent year-over- year due to product recalls and less contribution from some treatments, David Risinger, an analyst at Morgan Stanley in New York, wrote in an e-mailed report yesterday.

The company still has the largest market share of U.S. generic drug sales at 14 percent, ahead of Watson with 12 percent and Mylan with 11 percent, Morgan Stanley research showed.

Teva has fallen 4.4 percent this year in the U.S., compared with a retreat of 2.7 percent for Mylan and a gain of 17 percent for Watson. The Israeli drugmaker’s ADRs declined 23 percent in last year, the biggest annual slump since 2006.

The generic drug market is ‘‘fragmented and major players lack critical mass,” Risinger wrote. “The dynamics should support consolidation in coming years.”

‘Wait and See’

Patents on Copaxone, Teva’s multiple sclerosis treatment that generated 21 percent of its revenue in 2011, are set to expire in two years. A U.S. court decision, which will decide whether competitors can sell a similar drug, is expected by the end of June.

“A lot of investors would rather wait and see about the decision of the Copaxone treatment before they invest,” Randall Stanicky, an analyst at Canaccord Genuity, who has a buy rating on the stock, said by phone from New York on May 22. “The huge disappointment in earnings and lack of guidance hasn’t helped.”

The drugmaker said May 9 that first-quarter sales rose 25 percent to $5.1 billion, compared with the median estimate of $5.5 billion from 21 analysts surveyed by Bloomberg.

A slowdown in European demand for generic medicine and sales of Copaxone held back revenue for the first three months of the year, the company said.

Levin declined to comment on Teva’s profit forecast for 2012 during a conference call with analysts.

Partner Earnings

Partner, Israel’s second-largest mobile-phone company, tumbled 6.1 percent to $4.61 in New York yesterday, the lowest level since June 2003. The company’s Tel Aviv shares fell 5.4 percent to 17.13 shekels, or the equivalent of $4.45, the lowest intraday level since April 2003.

The company said first-quarter net income fell to 146 million shekels ($37.8 million) from 254 million shekels in the year-earlier period, according to a filing with the Tel Aviv Stock Exchange yesterday. Revenue retreated to 1.57 billion shekels, compared with the median estimate of 1.6 billion shekels by four analysts surveyed by Bloomberg.

Israel’s benchmark TA-25 gauge rose as much as 0.9 percent today.

SodaStream International Ltd. (SODA), the Israeli maker of soda machines, advanced 4.5 percent to $33.20 in New York after saying it received approval to sell its products in Brazil.

The company expects its machines, among other items, will be on the shelves of 200 stores by June 13, Yonah Lloyd, executive director of corporate development and communication, said yesterday.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Tal Barak Harif at tbarak@bloomberg.net

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