Teva U.S. Jump Widens Holiday Discount: Israel Overnight

Teva Pharmaceutical Industries Ltd. surged as the Tel Aviv shares resumed trading with the biggest discount to New York in 2 1/2 years after the prospect of acquisitions among generic-drug makers fueled gains.

Teva, the world’s biggest maker of generic medicines, jumped 4.8 percent to 145.6 shekels, or $39.92, at 10:49 a.m. in Tel Aviv. The New York shares rose 1.8 percent to $39.95 over the past two days, when Israeli markets were closed for a holiday. Teva’s Tel Aviv shares had closed at the equivalent of $38, the widest gap since Jan. 7, 2011. The Bloomberg Israel-US Equity Index in New York added 1.3 percent over the past two days in New York.

Petach Tikva, Israel-based Teva, the most acquisitive generic-drug maker in the past three years, has been rising after Parsippany, New Jersey-based Actavis Inc. said last week it was in talks to buy Warner Chilcott Plc, which makes birth-control medicine. Actavis’s actions have stoked speculation Teva is also hunting for deals, according to Gabelli & Co. and Piper Jaffray & Co. Jeremy Levin, Teva’s chief executive officer, said May 2 that the company would seek expansion through small acquisitions.

“Teva has been benefiting from some of the chatter,” David Amsellem, an analyst at Piper Jaffray & Co., who rates Actavis the equivalent of buy and Teva neutral, said by phone from New York yesterday. “There’s no question that Teva could easily be acquisitive. They’ve been paying down debt, generate a lot of cash flow and have a CEO that’s been an active dealmaker.”

Early Stage

Shares of Actavis surged 13 percent last week after Bloomberg News reported that it’s in early-stage negotiations to acquire Warner Chilcott, which the companies later confirmed. The talks came after Actavis’s discussions to sell itself to Valeant Pharmaceuticals International Inc. stalled over price, people familiar with the matter said.

Other people said that Actavis rejected a $120-a-share takeover offer from Mylan Inc. Teva looked at Actavis, said one of the people, though the Israeli company is more keen on smaller acquisitions, one of the people said.

“Speculation was that they looked,” Kevin Kedra, analyst at Gabelli, who rates both Teva and Actavis a buy, said by phone from Rye, New York yesterday. “They weren’t necessarily interested, but Teva said they’re looking to be active.”

Warner Chilcott rose 7.1 percent since the talks were reported by Bloomberg News on May 11. Actavis added 3.4 percent, while Teva increased 2.7 percent.

13 Deals

Teva completed 13 deals with an average value of $968.5 million over the past three years, according to data compiled by Bloomberg. As of March 31, Teva had $3.82 billion in free cash flow, the highest in its history, data compiled by Bloomberg show. The company’s total debt has declined 14 percent since the end of 2012 to $12.7 billion.

Levin assumed the chief executive role in May 2012 from Bristol-Myers Squibb & Co., the maker of the blood thinner Plavix, to help the company diversify its stable of medicines and products. The company will cut as much as $2 billion of costs in the next five years, Levin said as he laid out his strategy in December.

“I don’t think he’ll be active in acquiring generic assets,” Jason Gerberry, an analyst at Leerink Swann & Co. in Boston, said by phone yesterday. He has the equivalent of a hold rating on Teva and Actavis and a buy on Warner Chilcott. “It’s more likely he’ll be active in acquiring branded assets that have longer exclusivity periods with them and will be more durable.”

Charlie Mayr, a spokesman at Actavis, declined to comment beyond the company’s May 10 statement. Rochelle Fuhrmann, senior vice president of finance at Dublin-based Warner Chilcott, didn’t respond to a phone call or e-mail. Representatives at Montreal-based Valeant, Mylan in Canonsburg, Pennsylvania, and Teva declined to comment.

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