Teva Pharmaceuticals (TEVA) out with earnings late last night.  Globes reports this morning that Copazone sales rose 29% year over year while overall sales increased 18% over 2007.  Reporting $2.82 billion over analysts’ expectations of $2.68, TEVA beat on the top line.  TEVA also beat with $.65 on EPS.  According to Globes, “As of July 23, 2008, Teva had 149 product applications awaiting final FDA approval, including 41 tentative approvals.”

Bank of Israel raises interest rates to 4%.  Read more.

Zoran (ZRAN) reported disappointing earnings last night.  Transcript here.

Just eight months after its launch, Sheldon Adelson’s free Hebrew daily, Yisrael Hayom, has become the second most widely circulated newspaper in Israel, edging out Maariv.

Scopus Video (SCOP) moves into black and according to the company, things look even better in the second half of 2008.

Here’s an interesting interview with VC Cafe’s Eze Vidra pitting Israel against Sand Hill Road.

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What to do about the strong Shekel? That is a question I hear about 10 times a day form my clients. Everyone has been talking about the impact the strong local currency has had on the economy. The Bank of Israel has even attempted intervening in the currency markets, mostly with little success. So what to do? Let the free market work its magic.

Once again we see how market forces are able to correct short-term imbalances. Over the last week the US Dollar has surged more than 6% against the Shekel. Part of this was due to BOI intervention, but most of the impact has come from two large Israeli companies taking advantage of a strong currency to make very large foreign acquisitions.

Teva Pharmaceuticals (TEVA) $7.5 billion acquisition of Barr (BRL) and Koor Industries $900 million investment into Credit Suisse (CS) has sparked Dollar buying by these acquiring firms to complete the deals. According to a Globes article: ” Bank Leumi will provide Teva with $1.8 billion in financing, is expected to boost domestic demand for foreign currency. Capital market sources say that Teva has been buying dollars on a large scale in the past few days for the acquisition. In addition, IDB Holding Corp. Ltd.  subsidiary Koor Industries Ltd.’s announced that it plans to double its investment in Credit Suisse Group to NIS 3 billion, and has also been buying foreign currency for this purpose.”

We have also recently seen European companies buying up American firms, for the same reason. They also have a strong currency and want to get good deals. Be it Genentech (DNA) or Anheuser-Busch (BUD) while their price tags were massive, the acquiring firm actually bought these companies for a 20-30% discount in local currency. Now they need to go out and get the Dollars to complete the deal. This should help the greenback as well.

The lesson we can learn: leave markets alone, and let them do their thing, and ultimately, aberrations will work themselves out.

Aaron Katsman, IsraelNewsletter.com

Disclosure: Author’s fund has a position in TEVA as of 7/23/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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Aaron Katsman
IsraelNewsletter.com

Once again Israel has demonstrated that what it lacks in natural resources it more than makes up for in brainpower. Lucky for the world that it’s a renewable resource. News that Azilect, a drug that is co-developed by Teva Pharmaceuticals (TEVA), has been successful in the treatment of Parkinson’s Disease, is another in the long-line of cutting edge innovations produced in Israel, and exported to the the rest of the world.

According to a report in Haaretz: “Azilect, which is the brand name for rasagiline, was tested in 1 milligram tablets as a treatment for Parkinson’s Disease. Teva said yesterday that the drug can actually slow the disease’s progression, which can’t be said for any other therapy for the so-far incurable nervous system condition.”

For Teva, this drug has the potential to generate $1billion is sales, and be a mega-drug. Teva, biggest generic drug company in the world, has also turned into a R&D powerhouse focusing on neurological diseases. Copaxone, another Teva product which treats Multiple Sclerosis, has turned into the number 1 global treatment in the fight against MS.

For the more than 4 million Parkinson’s sufferers, this breakthrough could be life changing. Teva hopes to get regulatory permits to sell the drug not only as a treatment of the disease but also as a way to slow down the progression of the disease. They are shooting for the end of ‘09 to get the permits. For both investors and Parkinson’s sufferers, let’s hope they get the permits sooner rather than later.

Disclosure: Author’s fund has a position in TEVA as of 6/17/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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Aaron Katsman
IsraelNewsletter.com

Morgan Stanley (MS) just announced changes made to their MSCI Israel index. Among the changes was lowering weightings in hi-tech and insurance. Ok, nothing very unusual. They raised the index weighting on the banking sector. Again, nothing to write home about. It’s only when you look at the individual stock weightings that you may want to scratch your head. Teva Pharmaceuticals (TEVA) has a staggering 44.8% index weighting. My question to the folks at MSCI is, what’s the point? Why bother having an index which is essentially one company? After all Teva is about 9.5% of the local Tel-Aviv index.

For ETF investors this rebalance is important. Investors who have either purchased or are thinking about purchasing the iShares MSCI Israel index (EIS) had better be warned. They are in essence just buying Teva. They are certainly not getting any meaningful type of linkage to the local Israeli index. For investors looking for more diversified exposure, you may want to check out the new NETS TA 25 index fund (TAV) . In fact, fellow IOI colleague Zack “Billy Squier was underrated” Miller, had a real must-read, in-depth analysis of the differences in the 2 ETFs.

MSCI is often criticized for the same reason. They take the largest position in a particular index, and make it a very large chunk of the index they are trying to create. What’s the point? Shouldn’t a market index be a bit broader?

6/10/2008: An update on this post can be found here.

Disclosure: Author’s fund has a position in TEVA. He has no position in any other stock mentioned as of 6/6/08.

Please see our Disclaimer HERE.

NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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