Teva Vs. Amneal: JPMorgan Sees Hope For One, Decline For The Other

It’s been a rough 2019 for some biotechs. Amneal Pharmaceuticals Inc (NYSE: AMRX) is down 81% year-to-date, while Teva Pharmaceutical Industries Ltd (NYSE: TEVA) is down 41%.

JPMorgan sees redemption in one of the stocks — and further decline in the other.

The Analyst

Chris Schott upgraded Teva from Underweight to Neutral with an $8 price target and downgraded Amneal from Neutral to Underweight.

The Teva Thesis

With positive optics on Teva’s opioid exposure and stabilizing mid-term fundamentals, JPMorgan sees balance in the stock’s costs and benefits.

“We remain fairly bearish on the longer-term setup for the company between its lack of growth-drivers (Ajovy underperforming expectations so far, lingering LOEs, etc.) and still high-leverage (especially after taking into account potential cash flow going to opioids),” Schott said in a Tuesday note. (See his track record here.) 

The Amneal Thesis

Amneal offers little opportunity for redemption, the analyst said. 

After a series of poor earnings and lower guidance, the company’s turnaround depends on an unlikely pipeline success, according to JPMorgan.

“While some of the challenges facing Amneal do appear fixable (supply penalties, plant utilization, etc.), many appear fundamental (a function of the evolving dynamics in the US Gx market), and will likely take time and resources to fix (which the company is increasingly lacking at 7x leverage and with an ever-depressed equity value),” Schott said. 

Price Action

Teva shares were trading 1.93% higher at $9.51 at the time of publication Tuesday, while Amneal shares were up 4.36% at $2.76. 

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