Teva Advances as Savings May Offset Competition: Tel Aviv Mover

Teva Pharmaceutical Industries Ltd. rose the most in seven months after Sanford C. Bernstein & Co. said cost savings could offset the effect of generic competition on sales of bestselling multiple sclerosis injection Copaxone.

Shares of Petach Tikvah, Israel-based Teva gained as much as 3.8 percent to 148 shekels, the biggest gain since Aug. 7. The shares traded at 148 shekels shekels at the close in Tel Aviv. The company’s more actively traded American depositary receipts in New York soared 6.4 percent in the last two days.

Cost cuts could offset about 80 percent of Copaxone’s expected decline in contribution to earnings due to generic competition, Ronny Gal, the analyst, said in a note to investors after having a meeting with company executives. “This is thus the second most-important issue for Teva.”

Gal decided to change his model following the meeting, giving Teva credit for $1.3 billion in tax cuts from 2014 to 2016, he said. Management was “confident” significant cuts are possible and that a core team of five people, supported by 30 functional experts, has been given responsibility for identifying opportunities, he added.

The world’s largest maker of generic drugs has pledged to reduce costs by as much as $2 billion in the next five years to increase long-term profitability as Copaxone faces competition from newer oral drugs and the threat of generics. While a U.S. federal district ruling in June blocked generic versions of Copaxone until patents expire in 2015, generic drugmaker Momenta Pharmaceuticals Inc. appealed in July and expects a decision by the second half of 2013.

Teva will probably raise its dividend by the end of the fiscal year, depending on Copaxone sales and barring any “adverse” events, Gal said. The analyst also reduced his earnings estimates as Teva’s tax rate is expected to rise on changes to Israeli taxes and as Copaxone earnings decline.