EFTA00702577.pdf

From: Richard Kahn c:I > To: "jeffrey EI Subject: Fwd: Allergen and Teva Date: Thu, 28 Jul 2016 17:47:26 +0000 Wadi merits: agn.pdf; teva.pdf; Cvt_Primer_2013_NEWEST.FDF !ohne-Images: image0Ol.png Richard Kahn HBRK Associates Inc. 575 Lexington Avenue 4th Floor New York. NY 10022 cc Begin forwarded message: From: -Ens, Amanda' •z > Subject: Allergen and Teva Date: July 28, 2016 at 9:08:09 AM EDT To: Richard Kahn ‹ > Rich, Regarding biotech, our traders mentioned they are starting to see some rotation within healthcare from yieldier core names into blotechs as investors start positioning for a potential catch-up trade. That said, given your existing exposure, like to suggest AGN and TEVA in specialty pharma. We can also discuss some names in sectors such as med tech and healthcare distribution. BAML analyst Sumant Kulkarnl reiterated his strong buys on AGN and TEVA overnight. Here are two ways to play the story via convertible preferreds where you get upside participation along with yield. As investors continue to search and stretch for yield, mandatory convertible preferreds such as these stand out to me as an attractive and differentiated opportunity. As an investor, you will receive shares at maturity and in the meantime, earn an attractive yield at a considerable pickup over the common stock dividend. This yield, along with the conversion ratio sliding scale, can result in an attractively skewed upside vs downside profile. AGN - BAML reaffirming BUY on US1 listed AGN after FTC approval of generics sale to Teva. We like AGN due to its healthy product mix, solid pipeline and flexibility to deploy capital to drive shareholder return. Next catalyst will be 2Q eamings/2H16 Outlook on 8/8, $294 price target. Quick glance at AGN A 5.5% pfds: 911.5-913.50 vs 260.24 The pfds yield 6% vs zero in common representing great yield advantage. $294 price target Is 13% above current stock. On a 4/- 2O% move in common, the pfds participate 77% on upside and 60% on downside. Out of 24 analysts, 19 have buys, 4 holds, zero sells, avg price target 5298.63 (+15%). These are great outright preferreds for investors looking to participate in upside while picking up solid yield. TWA - BAML reiterating BUY after FTC's approval of AGN generics deal. We continue to like TEVA's positioning In generic pharma where scale and product diversity are Increasingly Important. TEVA remains one of our top picks in Spec Pharma, $72 price objective (30% upside). Quick glance at TEVA 7% preferreds 905.50-907 vs $55.16. The Pfds yield 7.7% vs 2.47% in common giving yield advantage of 5.25%. On a ./- 2O% move, pfds participate BO% on upside and 65% on the downside. Out of 33 analysts, 24 have BUYS and 7 Holds, no sells with avg price target of $69.92 (27% upside). This Is another great outright trade for those wanting to participate in upside on stock while picking up 525bps of exra Sine Stock Pict Level %arse Per (Hedge Ratio) Low Stnike High Strike Current weld Yield Advantage BAWL ICItIng BAHL Prct Tgt Upside to Price Tgt Up 20% return Dawn 20% return 240.20 113.00 907.00 210 1200 SOO 6250 362.00 75.00 6.0% 77% SD% 52% Buy Buy 5 291.00 3 72.00 12.8% 30.5% M- 15A% 16.4 .123% -13% TWAT% (TEINF)12/15.2011) $5 16 Source: Bloomberg, MAIL Pr icing as of 7/27/2016 Please find our research reports and convert primer attached. Allergen (AGN, Buy, Price Objective: $294) • With FTC approval of AGN generics sale to Teva out of the way, we believe investors will start to take a closer look at AGN. • We like AGN due to its healthy product mix, solid pipeline, and flexibility to deploy capital to drive shareholder return. • the next catalyst will be 2Q eamings/2H16 outlook on 8/8 with investors likely focused on AGN brands' execution. Company Description Allergen is a specialty pharmaceutical company that develops, manufactures, and markets branded and generic pharmaceutical (generics to be divested) products. The company's growth has been driven largely by acquisitions supported by internal growth. With significant acquisitions of "old" Allergen, Forest, and Warner-Chlicott, this Irish- EFTA00702577 domiciled company now has significant global operations and scale. Investment Rationale We like AGN's business mix (some relatively durable brands/blosimilars), geographic footprint, thoughtful and targeted strategy, strong management team, and imaginative business development approach. We believe the acquisitions of Allergen, Warner and Forest put Irish•domiciled AGN in a strong strategic and financial position for an evolving Pharma landscape in the years ahead. Teva Pharmaceutical Industries (TWA, Buy, Price Objective: 572) • We are reiterating our Buy on TWA after the FTC's approval of the AGN generics deal (expected to close next week). • We continue to like TEVA's positioning in generic pharma where scale and product diversity are increasingly Important. • Our updated model is conservative vs. TEVA's issued 2017-19 outlook as we assume generic competition to Copaxone 3TW in '17. Company Description Teva, an Israeli/US generics company, is one of the largest companies in the global generic pharma industry and is becoming larger after the pending Allergen generic deal closes. The company's robust business model includes global generic capabilities, vertical integration into the active pharmaceutical ingredients (API) business, and a branded specialty pharma business (Copaxone, Treanda, Ai lett, Nuvigil and other products). Investment Rationale We believe Teva is a compelling investment opportunity as we like the company's geographic and business mix diversity, and believe that the company's ongoing operational turnaround on generics and its branded pipeline are underappreciated by the Street. We also like managements heightened sense of urgency on driving growth both organically and through M&A activity as seen via the recent Allergen generics transaction. Amanda Ens Director Bank of America Merrill Lynch Merrill Lynch, Pierce, Fenner & Smith Incorporated One Bryant Park, 5th Floor, New York, NY 10036 PhoneWIRIMIPMobile: 917.386.3280 The power of global connections" This message, and any attachments, is for the intended mei ien s onl ma contain information that is privileged, confidential and/or proprietary and subject to important terms and conditions available at If you are not the intended recipient, please delete this message. EFTA00702578