A Look At Teva's Paragard IUD Asset Sale To Cooper Companies, From Both Sides

Teva Pharmaceutical Industries Ltd (ADR) TEVA said Tuesday it has agreed to sell its Paragard IUD product to Cooper Companies Inc COO in a $1.1 billion cash deal. Teva also confirmed it will continue divesting the remaining assets it holds within the women's health portfolio along with its oncology and pain relief businesses in Europe.

UBS: Teva Got A 'Good Price'

Teva's investors should be positive on the deal, as Teva got a good price for its asset sale, and the proceeds will be allocated toward lowering Teva's debt load, which remains a "significant overhang," UBS's Marc Goodman commented in a research report.

Teva sold its asset at an implied valuation of 6.5x sales, which is a "good price" for a long-duration asset, the analyst noted. In fact, the price tag is a premium to prior deals in the pharmaceutical space, including Mallinckrodt's acquisition of Acthar at 5.5x sales and 5.8x sales for Ikaria (Inomax).

The analyst maintains a Neutral rating on Teva's stock with an unchanged $19 price target (see Goodman's track record here).

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Baird: Positive For Cooper

There are many investors who aren't satisfied with Cooper's expansion efforts within the women's health sector but the agreement with Teva has several positive attributes that shouldn't be overlooked, Baird Equity Research's Jeff Johnson commented in a research report.

Perhaps most notably, Paragard's revenue has been growing at a mid-single-digit rate in recent years but with slightly lower unit growth and positive pricing, the analyst noted. But at the same time, the product's gross and operating margins of approximately 90 percent and 60 percent, respectively, are "well above" medtech norms.

In addition, reimbursements for Paragard is "broad and well established" across both commercial and government payers while any notable competition is a few years away with a possible entrant in 2021.

Finally, the deal with Teva calls for no change to the manufacturing process, and there is limited sales force integration risk as well.

Bottom line, the asset purchase is a "good fit" for Cooper's business and the analyst is "generally comfortable" with the deal. Accordingly, investors should be buyers of the stock on any near-term pullbacks related to the announcement.

Shares of Cooper Companies remain Outperform rating with a price target boosted from $267 to $273.

Related Link: With New CEO In Place, Focus For Teva Pharma Turns To 'Execution' ________ Image Credit: © Nevit Dilmen [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0) or GFDL (http://www.gnu.org/copyleft/fdl.html)], via Wikimedia Commons