Goldman Sachs on Friday reviewed the generic drug industry, initiating the coverage of Teva Pharmaceutical (NYSE:TEVA) and Amneal Pharmaceuticals (NASDAQ:AMRX) with Buy ratings and Viatris (NASDAQ:VTRS) with a Neutral rating.
The analyst Matt Dellatorre issued mostly positive remarks on the industry, citing opportunities to benefit from the sector's “undemanding” valuations driven by recent micro volatility and macro concerns.
“Broadly speaking, while the pace of legacy product erosion remains the key risk to near-term top-line growth and tariffs represent an overhang on margins (in our view, manageable), we are optimistic on the forward outlook,” Dellatorre wrote.
As reasons for the bullish outlook, the analyst cited multiple factors, including ongoing portfolio changes favoring higher-value products such as branded drugs and a stable pricing outlook for U.S. generics.
With a 12-month per-share target of $24 on Teva (NYSE:TEVA), the analyst pointed to an improvement in the Israeli drugmaker’s core business, which he said could generate upside to near-mid-term EBITDA consensus driven by strong growth in its branded portfolio.
“We see the strongest (above consensus) earnings’ growth potential for TEVA (where the branded portfolio now represents the key growth engine and a significant valuation lever) with recent clinical updates demonstrating the company’s ability to innovate,” Dellatorre wrote.
For Amneal (NASDAQ:AMRX), the analyst issued a 12-month target of $12, citing a positive growth outlook for the company’s core business due to its robust pipeline and track record of business execution.
With a 12-month target of $10 on Viatris (NASDAQ:VTRS), Goldman Sachs argued that the FactSet consensus Pfizer (PFE) spinoff appears “fair” and noted a lack of clarity in the company’s growth outlook due to structural dynamics in its core business.
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