Although Teva’s financials are struggling, a restructuring could cut $3 billion from costs next year and Teva Pharmaceutical’s full-year guidance for 2018 still calls for the company to turn a profit, after adjusting for one-time items.
If Teva Pharmaceutical can orchestrate its turnaround successfully, its sales stabilize, and it can reduce the burden associated with its $28 billion in long-term debt, then a good argument can be made that now’s a very attractive time to consider adding its shares to portfolios.
You forget to read the history of what happened. TEVA was profitable, leading No 1 generic drug company two years before paying 3.5% dividends. Since they took over a company , on cash, heavily debted to 36B, and the taken over company was not profitable. CEO was thrown out for that take over, new CEO came.
The stock dived from $70 (when profitable) to $10.5, and new CEO initiated restructuring plan (11/2017) after reducing the debt from 36B. Warren buffet started buying from $14.50 onwards. So far, he bought three times whenever it dipped. TEVA is still profitable without the new takeover. The CEO is aggressively selling unprofitable units to pay off the debt. They restructured entire USA operations to reduce over head and he is producing results beyond/beating analysts expectation last 3 quarters.
The EpiPen is the major market in USA. So far MYL is the one and only approved provider of EpiPen which has huge market. For the first time, after 2016 election EpiPen issue, FDA approved Teva as generic drug provider of Epipen. This means a major win and stock going up. MYL (Competitor) sells 8 Million Epipen every year at $600 around price, which is earning appx $400 M profit. Now, TEVA will have some share of this profit.
The restructuring/recovery will reduce considerable debt in 2 years (as per CEO) and he is well known to bring back such companies.
Warren buffet is just an indicator what to buy,…that is all. After he bought TEVA, the next 3 quarters TEVA beat analysts consensus every time.
BTW: I am heavy in TEVA, bought more today too based on epipen approval. TEVA alone is 40% up for me YTD.
I’m not a fan of turnarounds or mergers. They fail more times than they are successful. One of the biggest issues is once the job cuts and sell-offs start a lot of top talent leaves. It’s impossible to recruit top talent during a time period like that. They’ll get some initial gains from starting the restructuring. Time will tell if they can stay on target with the financial goals.
It is up to individual comfort and You are right what you do.
If buffet has not bought TEVA, I would not have thought about TEVA even though I like M&A. My gut feeling is that Buffet team would have taken due diligence, I just follow. I have seen his positive side, BAC, AAPL, TEVA. It is blind trust, but it pays to me. It does not mean that I follow him every stock.
Maybe he understood.
WB has now interest in healthcare with their joint effort with Amazon and MSFT(?). Generics play into that well.
Now I don’t know why TEVA over another generics company (what are they?), but maybe that’s a good sign.
I don’t pretend to understand everything warren does, and i find pharma extremely risky and volatile, but the man has money
WB gave independence to the new people up to 1 or 2 BLN (I think). This one is less than 1 Bln but 4.5% of TEVA Mcap. It is supposed to be one his new men decision.
However, WB lauded TEVA (Indirectly) during his last May 5th or May 7th discussion that one of his international investments from Israel is good.
WB took BAC during worst period, when BAC at the verge of bankruptcy. He invests those turnaround play, heavy debt, losing money as long as he sees the visibility of recovery.
During his last review , May 5th or May 7th, he was hinting that Banks were ready to give him higher rate (6% he got) on preferential allotment at that worst period of 2008, but they internally calculated that providing higher percent (more than 6%) may lead the bank to go for insolvency and decided to get 6% and get a 10 years BAC options.
I think WB bought preferred shares of banks that can be converted to common later on. That’s far safer than just buying common of a money losing business.
Anyway I am not saying buying Teva is bad. It’s just that I can’t understand it in the WB framework I know of. There could be many other reasons why it’s a good buy.
To me, I do not even try to understand his framework. I just pick the best one from his pick whichever I am comfortable and the price point when I enter.
There could be many other reasons why it’s a good buy.==> One of the reasons I clearly see is EpiPen, the market in USA and growth is 200 mln (50% US share) to 400 mln/year.
Read about EpiPen and MYL history and the issues created by Hillary during 2016 campaign. You will know more why this is spiking. EpiPen is life saving emergency drug mandated to be in every school.
though very rocky since purchase.
Anyhoo, now past wuqijun’s $50k, 2000x $25.47