Two Votes for Teva

11/25/2005 12:00 am EST

Focus:

Michael Shulman

Editor, Short-Side Trader

Israel is home to many successful companies, particularly in areas such as technology and healthcare. Teva, a leading generic drug firm is one such industry leader. Here, Beth Gaston Moon and Michael Shulman offer their reviews of the company'.

"Headquartered in Israel, Teva Pharmaceuticals (TEVA NASDAQ) develops generic versions of brand-name heart medications, antibiotics, heartburn treatments, and more, " notes Beth Gaston Moon, analyst with Schaeffer's Investment Research. "Its products include less-expensive versions of Prozac and cholesterol lowering drug Mevacor. TEVA currently manufacturers 150 generic products. TEVA shares have enjoyed a rapid surge in popularity. Since last October, the stock has tacked on nearly 80%. In October, the equity rallied through short-term resistance at the 34 level to recapture the renewed support of its ascending ten-week moving average.

"Thanks in part to the company's pending acquisition of Ivax, which is expected to close in December, TEVA has seen its short-interest levels reach historical heights. Since July, TEVA short interest has spiked up 200% to a multi-year high. More than 7% of the stock's float has been devoted to the shorted side, leaving a short-interest ratio of nearly 11 days to cover. If these bearish investors begin to cover their positions, TEVA could enjoy added strength."

Teva is also a buy recommendation from Michael Shulman, editor of ChangeWave Biotech Investor. He notes, "Teva recently received FDA approval for a biggie—a generic version of Zithromax, which is often prescribed as part of a Z-Pack. Zithromax is a blockbuster antibiotic with $1.6 billion in sales. Despite a lawsuit by Pfizer, (which has turned to its lawyers because its scientists are running dry), Teva launched the product as soon as it got FDA approval.

"Under the arcane regulations tied to the laws governing generics, Teva now has a six-month window of exclusivity, before other companies can compete. Teva also presented data that showed its multiple sclerosis (MS) drug Copaxone may protect patients from axonal injurynerve system damage from MS and induced some ‘neuronal metabolic recovery’ in patients with the relapsing-remitting form of multiple sclerosis. Patients taking Copaxone also showed a 50% reduction in relapses from the disease."

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