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Bullish Teva Bets Hit 7-Month High on Strategy: Israel Overnight

Teva Pharmaceutical Industries Ltd. CEO Levin
Jeremy Levin, chief executive officer of Teva Pharmaceutical Industries Ltd. Photographer: Scott Eells/Bloomberg

Options traders are the most bullish since May on Teva Pharmaceutical Industries Ltd. as Chief Executive Officer Jeremy Levin prepares to unveil a growth plan to reverse a rout that has made the stock among the cheapest global drugmakers.

The ratio of outstanding calls to buy Teva versus puts to sell reached 1.41 on Dec. 4, the most since May, according to data compiled by Bloomberg. American depositary receipts of the world’s largest maker of generic drugs climbed for a seventh day yesterday, the longest stretch of advances in seven months. The Bloomberg Israel-US Equity Index of the largest New-York traded Israeli companies fell for the first time in three days, led by Alon Holdings Blue Square-Israel Ltd.

Levin, a former executive at Bristol-Myers Squibb Co., is scheduled to meet with investors today in New York to present plans for product line expansion and cost cutting. Petach Tikva, Israel-based Teva is looking for new revenue sources as its bestseller multiple sclerosis treatment Copaxone faces competition from newer oral drugs.

“There’s certainly optimism about Levin’s ability to continue to grow the company through business development,” Kevin Kedra, an analyst at Gabelli & Co. in Rye, New York who has a buy rating on the shares, said by phone. “There’s concern about Teva’s reliance on Copaxone but Levin knows that, and a plan to diversify the business away from Copaxone would be very good for the stock.”

Strategic Vision

Teva added 0.2 percent to $42.52, the highest since May 8. Teva’s meeting is scheduled to begin at 12 p.m. New York time. The Bloomberg Israel-US Index dropped 0.1 percent to 87.44. The Tel Aviv’s benchmark TA-25 Index increased 0.8 percent to 1,244.51. The company’s Israeli shares climbed 0.6 percent to 163.1 shekels, or $42.95.

Levin, a former senior vice president for strategy at Bristol-Myers, took over Teva in May with a mandate to develop new drugs through smaller partnerships and deals while moving the company away from its reliance on growing through acquisitions. The wide-reaching gathering in New York is Levin’s first opportunity to present his strategic vision in a public meeting with investors and Wall Street analysts.

Teva lowered its 2013 forecast on Nov. 30, estimating revenue will be between $19.5 billion and $20.5 billion, and earnings excluding some costs will be $4.85 to $5.15 a share. Analysts predicted $20.8 billion and $5.63, respectively, based on average estimates compiled by Bloomberg. Teva’s revenue will probably increase 0.5 percent in 2013, according to the mean estimate of 24 analysts surveyed by Bloomberg.

‘Rearview Mirror’

Levin promised on the same call to deliver $1.5 billion to $2 billion in cost cuts to boost shareholder value.

“2013 is already in the rearview mirror,” Jason Gerberry, an analyst at Leerink Swann & Co. who has a buy rating on the shares, said in a phone interview yesterday from Boston. “Investors want a look at Teva’s pipeline, getting visibility at the profit line, and also at cost savings, where they might re-invest money into new products and programs.”

Teva’s decline from this year’s high of $46.09 has pushed valuations to 7.9 times estimated earnings, the second-lowest multiple among the world’s 20 biggest drug companies, which have an average price-earnings ratio of 13.8. Shares have lagged peers this year amid speculation the multiple sclerosis medicine Copaxone may lose market share to new treatments such as Novartis AG’s Gilenya and Biogen Idec Inc.’s not-yet-approved pill BG-12.

Volatility Drops

Teva gained 5.4 percent since the company said Jan. 1 that Levin would succeed Shlomo Yanai as president and chief executive. The stock’s 30-day volatility fell to 17.3 from 32.6 at the beginning of the year.

Israel, which has a population of similar size to Switzerland’s, has 54 companies traded on the Nasdaq Stock Market, the most of any country outside the U.S. after China. The nation is also home to more startup companies per capita than the U.S.

Blue Square, Israel’s second-largest food retailer, tumbled 5.9 percent to $2.54, a two-week low. Shares of the Rosh Ha’Ayin, Israel-based company lost 1.9 percent to 9.81 shekels in Tel Aviv, or $2.58.

Mellanox Technologies Ltd., the maker of technology used to transfer and store data, rebounded from a five-month low, climbing 3 percent to $70.39. Shares in Tel Aviv added 2 percent to 269.20 shekels, or the equivalent of $70.89.

Shares sank 20 percent in the last two weeks on speculation the Yokneam Elit, Israel-based developer may lose market share to Intel Corp.

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