Teva: Maximum Optimism

Summary

• Teva is one of the largest pharmaceutical companies in the world and the second largest generic medicine company (after Viatris) in terms of revenue.
• Sales of the company's patent medicines continue to grow at a significant pace from quarter to quarter.
• According to company management, in 2021, the cash flow will be $2-2.3 billion.
• By 2023, the company may start selling several biosimilars, one of which is Humira's biosimilar, whose patent medicine brought AbbVie about $20 billion in 2020.
• The company continues to reduce net debt by paying $1.475 billion in Senior Notes due July 2021.

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JHVEPhoto/iStock Editorial via Getty Images

Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) is one of the largest pharmaceutical companies in the world, manufacturing not only generics but also patent medicines since 1901. Teva most recently reported strong growth in net margin, cash flow in its Q2 quarterly report. Several medicines make the investment in the company attractive, namely AJOVY®, whose sales have grown significantly by 32% year-on-year, in addition, AUSTEDO® sales have grown by 20% quarter-on-quarter.

Thanks to the effective work of Teva's management, the company continues to reduce its net debt and repaid $1.475 billion on its senior bonds in mid-July, reducing it by 36% from the peak. In the coming years, the company plans to begin commercializing several patent medicines and biosimilars, one of which is Humira's biosimilar, which has generated nearly $20 billion in sales for AbbVie over the past year.

Given the uncertainty surrounding the opioid crisis, improved company's financial position and huge potential for pipeline development, Teva could be an excellent choice for long-term investors.

Source: Created by author

Company's Financial Position

The company's revenue is stable, bringing in about $4 billion a year to investors, despite the difficult situation with COVID-19, which has contributed to a decrease in the number of patients' visits to doctors and medical procedures performed.

Source: Q2 2021 Earnings Call Presentation

However, we can see excellent trends in the expansion of the use of patent medicines, which have significantly higher margins, which leads not only to higher revenue but also to net income.

One such drug is AUSTEDO®, which is approved for the treatment of tardive dyskinesia in adults and also for the treatment of chorea associated with Huntington's disease in 2017.

The total number of patients with tardive dyskinesia exceeds 500 thousand in the United States and more than 30 thousand people with Huntington's disease, which offers huge potential for continued revenue growth over the coming years.

North American sales were about $174 million in Q1 2021, an increase of 20% QoQ and 8% Q2 2020. In addition, more than 38,000 prescriptions were issued in Q2 2021, up 15.3% more than a year earlier.

Source: Q2 2021 Earnings Call Presentation

Despite COVID-19, AUSTEDO® generated revenue of $636 million for the full year of 2020, up $225 million from the previous year. As we can see in the graph below, the growth from year to year is more than $200 million and if this trend continues, investors can see income in the amount of $840-850 million for 2021.

Source: *Author's elaboration, based on the company's forecast.

The next drug that has the potential to increase the company's margins and revenue is AJOVY®, approved in the US and Europe for the treatment of migraine in adults.

As we know, migraine is an extremely common neurological disease, the symptoms of which are periodic headache attacks of varying intensity. The disease affects 39 million men, women and children in the United States and 1 billion worldwide, which offers huge potential for increasing the company's profits in the coming years.

North American sales were about $46 million in Q2 2021, up 32% from Q2 2020. Despite the difficult situation with COVID-19, the weekly volume of AJOVY® recipes continues to grow at a significant pace and, as a result, the company continues to increase its market share.

Source: Q2 2021 Earnings Call Presentation

In addition, AJOVY® was approved in Europe only in 2019 and according to the quarterly report, the company successfully continues to increase its market share, reaching 24.9% by May 2021.

Source: Q2 2021 Earnings Call Presentation

The company does not expect a slowdown in revenue growth and Teva's management expects sales to be around $300 million in 2021. One of the reasons for the 223% jump in revenues in 2021 compared to 2020 is the launch of the autoinjector for AJOVY®, which greatly facilitates the use of the drug, which leads to an improvement in the quality of life of patients suffering from migraines.

Source: *Author's elaboration, based on the company's forecast.

Increase in Net Income/Margin

First, it should be noted that since the outbreak of the epidemic in 2020, operating margins continue to improve from quarter to quarter, thanks to the company's cost-effective management strategy. The company currently has a Non-GAAP Operating Margin of about 26.7% and is forecast to grow to 28% by 2023.

Source: Q2 2021 Earnings Call Presentation

We also see an improvement in free cash flow not only from year to year but from quarter to quarter.

Source: Q2 2021 Earnings Call Presentation

Thus, the company has made tremendous progress in increasing it in the second quarter of 2021 compared to the first quarter of 2021, namely the increase was more than 959%.

Source: Author's elaboration, based on 10-Q and 10-K reports.

While it is too early to say that the company's business has recovered from the failed Actavis acquisition, the rise in free cash flow, improved margins, and increased sales of patent medicines give confidence that huge debts will be paid off in the years to come. Let's move on to a more detailed analysis of Teva's debt burden and how the company's CEO is handling this difficult situation.

Debt - Is There Any Progress?

The main problem facing the company is a huge debt, which exceeds $22 billion at the end of Q2 2021. The reason for this is the acquisition of another generic leader, Actavis for $40.5 billion in 2016.

According to some experts, Teva significantly overpaid for the company, having incorrectly estimated the financial value of Actavis and, as a result, this led to a deplorable financial position of the company, increasing the Net Debt / EBITDA ratio to 5.38 in Q3 2016 from 1.66 in Q2 2016.

But is everything that bad at the moment? Has the position of the company improved after Kåre Schultz took over as CEO of the company? Kåre Schultz is a professional with many years of experience, before joining Teva he was President and vice CEO of another pharmaceutical giant Novo Nordisk (NVO). Taking over as CEO of Teva in 2017, his initial goal was to reduce debt and improve cash flow, so on a call for Q4 2017, he made this clear to Wall Street and investors by making the following statement:

I mentioned before that it's very important for us to secure the cash flow. And the reason for that is, of course, as you all know, that we had a significant debt. And as I've told many of you, I don't really like a company like ours to have as much debt as we have, and therefore we simply have to reduce it and we are working hard on that.

And he really was able to save the company from bankruptcy by gradually reducing the debt. Thus, as a result of the difficult and effective work of management, the company's net debt decreased from $36.9 billion in Q3 2016 to $22.7 billion in Q2 2021. In the following chart, you can see the gradual decline in net debt from 2016 to the present:

Source: Macrotrends LLC

Let's move directly to the analysis of the structure of debt and the main repayments of the company on Senior Notes in the coming years.

Source: Debt Factsheet

At the end of the second quarter of 2021, Teva had about $3.5 billion in short-term debt, which is about 15.4% of total net debt.

Source: Author's elaboration, based on 10-Q report

However, the company reported that it had successfully paid $1.475 billion on 2,200% Senior Notes due July 2021.

The next repayment is in November 2021 for 3.650% Senior Notes, totaling 1.202 billion. Given the stable cash flow, cash and cash equivalents that exceed $2.4 billion, I do not expect any difficulties in paying them off. Paying attention to the quotes of the November Senior Notes, no unusual moments were found either, the bonds are trading near face value, are low volatility,

Source: FINRA Bond Center

Let's move on to analyzing long-term debt.

Source: Author's elaboration, based on 10-Q report

And here the first questions arise, namely whether the company will be able to redeem the 2023 Senior Bonds, which total $4.5 billion or 19.8% of Teva's total net debt. The first repayment will fall on Senior Notes in March 2023 at a relatively low interest rate of 1.250% and the total amount by the due date of the promissory note will be $1.520 billion. Based on the mid-term cash flow of $2.11 billion for 2020, I estimate that the company will be able to pay off these Senior Notes, based on improved sales of patent medicines.

However, the main problem is Senior Notes at an interest rate of 2.800% and a total of $2.997 billion with a maturity date of July 2023.

At the moment, the company has no financial reserves and, as a result, Teva's management will have to turn to banks, the main holders of these bonds, to refinance a significant part of these obligations. One of the most recent major examples of debt refinancing was General Electric (GE), which essentially replaced short-term debt with long-term debt by successfully placing bonds with maturities until 2024.

Can Teva also do? At the moment, yes, since the bonds are trading close to face value, are low-volatility and, as a result, the company will not spend a lot of money if debt refinancing is really needed.

Source: FINRA Bond Center

Another way to repay Senior Notes and keep the business afloat is to dilute shareholders. This is a simple method for taking control of Teva's debt. However, this method has some disadvantages, namely, the dilution of the company's shareholders will lead to a decrease in the price of Teva's shares, so if the company's management needs at least 50% of the outstanding amount of Senior Notes due July 2023, then, given the current share price, this will lead to an increase in the total number of shares by 12%. In addition, this will lead to a decrease in the company's EPS and a decrease in the share of shareholders and, as a consequence, their influence on the future policy of the company.

Over the past few years, Teva has made public offerings in 2015 at $62.5 per share, up 84% from the current price. The received amount was necessary for the purchase of Actavis Generic. Thus, given the growth in cash flow and the lack of frequent underwriting public offerings, it is unlikely that the company's management will dilute shareholders in the coming years.

Besides, given the rise in inflation, the company may raise prices for some patent medicines, as it did at the beginning of the year by raising prices for 15 drugs by 5-6%, which will also allow more flexibility in making decisions on the company's debt.

If the company successfully cope with the repayment of Senior Notes with maturity dates 2021-2023, then the total debt will decrease by $7.762 billion or 34.2% and reduce the Debt / EBITDA ratio to 3 as planned by Teva's management, which will allow starting transactions with other pharmaceutical companies for the development and commercialization of medicines, to pursue more flexible financial policies and, as a result, will lead to an increase in the company's share price and may initiate talks about the beginning of dividend payments.

Product Pipeline - A Light At The End Of The Tunnel

The company develops both patent medicines and biosimilars, which, if successful in clinical trials and regulatory approvals, can significantly increase the company's revenue and Net Profit Margin. Let's take a closer look at some of the most advanced Teva developments.

Source: Q1 2021 Earnings Call Presentation

Biosimilar to Humira® (adalimumab)

Humira® is used to treat rheumatoid arthritis, psoriatic arthritis, ankylosing spondylitis, plaque psoriasis, and purulent hidradenitis in adults. This drug was developed by AbbVie and the first FDA approval was received back in 2002. According to the quarterly report for 2020, Humira brought the company about $20 billion in revenue, which is 3.5% more than sales in 2019.

Source: Author's elaboration, based on AbbVie's quarterly report

As time went on and patents expired, which ultimately led to the emergence of Humira biosimilars. So, at the moment, 3 drugs are approved in Europe,

Source: Author's elaboration.

And it is also expected to launch sales of several biosimilars in the United States in the second half of 2023.

Teva, as one of the leaders of generic companies, could not pass up the opportunity to get a piece of such a huge pie and entered into a partnership with Alvotech to commercialize five biosimilars in the United States, one of which is Humira's biosimilar. Under this agreement, Teva will be involved in the commercialization of products in the United States, and Alvotech will be responsible for the development and supply of these drugs if approved by the FDA.

And in the fall of 2020, the FDA accepted a Biologics license application for AVT02. The FDA's decision on this application is expected in September 2021.

In Q2 2021, Alvotech filed a lawsuit against AbbVie with the aim of invalidating Humira's key patents and allowing Alvotech/Teva to begin commercializing the biosimilar as early as 2023.

And in the case of a positive court decision for Alvotech/Teva on invalidating the patents and approving the biosimilar by the FDA, this could bring hundreds of millions of profits in the coming years and, as a result, increase Teva's cash flow, which can be used to reduce the debt burden.

AUSTEDO® (deutetrabenazine)

As previously stated, AUSTEDO® was approved for the treatment of tardive dyskinesia in adults and also for the treatment of chorea associated with Huntington's disease in 2017. The company is currently working on expanding the use of this drug, namely, conducting a study aimed at assessing the efficacy and safety of AUSTEDO® for the treatment of dyskinesia in cerebral palsy. The total prevalence of cerebral palsy at birth is estimated from various sources at 2 cases for every 1000 live births.

And the cumulative lifetime spending for sufferers of the disease is $11.5 billion, according to a report prepared by the CDC in 2004 and taking into account total inflation of 41.34% since this article was written and also an increase in the number of new cases of cerebral palsy have grown significantly and by now may amount to more than $15 billion.

Unfortunately, at the moment there are no approved treatments for cerebral palsy, and those drugs that are used in medical practice are intended only for the relief of some manifestations of cerebral palsy.

Initial data for the Phase 3 clinical trial is expected in 2023 and in case of positive results, the company will be able to submit a supplemental new drug application (sNDA) to the FDA in the next 3 years. The additional approval will significantly increase the potential number of patients who will be able to use AUSTEDO® (deutetrabenazine), which will lead to an improvement in Teva's financial situation.

Biosimilar to Prolia®(denosumab)

Prolia® (denosumab) is used to treat osteoporosis in both men and women. This drug was developed by Amgen (AMGN) and the first FDA approval was obtained back in 2010. According to the quarterly report for 2020, Prolia® brought the company about $2.7 billion in revenue, which is 3% more than in 2019.

Source: Amgen's quarterly report

Teva is currently conducting a clinical study aimed at demonstrating similar efficacy and safety of TVB-009 to Prolia®. Initial data is expected at the end of 2023 /the first half of 2024.

If the Teva biosimilar turns out to be effective and safe, then it is highly likely that the company will submit a BLA application to the FDA in 2024. In addition, the latest patents for Prolia® (denosumab) expire in February 2025, giving Teva the green light to begin commercializing the biosimilar in the same year.

Source: Author's elaboration, based on 10-K report

Risks

Regulation of prices for medicines.

During the election race for the presidency of the United States and also after the election, one of the main tasks set by Mr. Biden was "lowering the price of medicines". Namely, the White House administration will seek to implement reforms that will remove the law prohibiting Medicare from negotiating price cuts with pharmaceutical companies. So, in Biden's budget plan for fiscal 2022, it was proposed that the following

Source: Budget of the United States Government

About 50% of the company's revenue comes from generics, which are already at low prices, but if you look at the prices of AUSTEDO, which costs about 6 thousand dollars for 60 tablets and brings about 9% of total revenue, then this reform may negatively affect the recovery of the financial position Teva.

Decreased revenue from Copaxone.

Copaxone is a drug used to reduce the frequency of seizures in patients with multiple sclerosis, which was a cash cow for the company and generated huge cash flow before the launch of the generic version of Copaxone from Mylan in 2017.

So Copaxone's peak sales were more than $4 billion in 2016, and due to the influence of generics, profits decreased by 68% to $1.337 billion in 2020. And profit continues to decline and according to a press release for the 2nd quarter of 2021, the company expects $1.05 billion, that is, the annual decline will be about 22%.

Here is a graph showing Copaxone sales for the 2015-2021 period:

Source: Author's elaboration, based on 10-K reports.

As we can see, there is a slowdown in the downward trend in sales, but it is unlikely that the company will be able to stop it.

Opioid crisis.

As we all know, at the end of the 20th century, major pharmaceutical companies such as AbbVie Inc, Teva Pharmaceutical Industries Ltd, and Endo International Plc conducted a campaign according to which patients taking opioid pain relievers would not become dependent on them and were safe. However, in the end, their use led to a significant increase in addiction, mortality, and huge damages worth more than $78.5 billion a year, according to the Centers for Disease Control and Prevention.

As a result, several thousand lawsuits have been filed against several pharmaceutical companies and pharmacies, including Walgreens (WBA), CVS Health (CVS), Walmart Inc. (WMT), and Rite Aid Corp (RAD).

However, after several years of discussions, both sides of the conflict were able to reach a $26 billion settlement agreement with some of these companies in mid-July 2021.

In the quarterly report, we see the following company comment on this agreement,

Source: Author's elaboration, based on 10-Q report

Due to COVID-19 and the correspondingly difficult situation associated with it, the settlement process between Teva and the plaintiffs has slowed down, however, a principal agreement was reached, according to which the company will pay a small money penalty and supply Suboxone (buprenorphine naloxone) for 10 years.

Source: Author's elaboration, based on 10-Q report

From the Q2 2021 Earnings Call, the CEO of the company gave us important information about the net price that would be required for production and other costs associated with Suboxone, namely, he stated,

And it was Suboxone, generic Suboxone over 10 years, whatever the demand was estimated at $23 billion at list price, probably $10 billion, $11 billion at net price, and of course, the manufacturing cost, which is somewhat less than that.

In addition, Kåre Schultz, answering analysts' questions, stated the following:

We are optimistic that we can reach a settlement during the coming year. We think that the court cases that are ongoing right now give a good incentive for all parties to reach a settlement, and we think a settlement will be to the benefit for all the Americans that suffer from substance abuse. So, we are cautiously optimistic that we are moving ahead towards a settlement on a sort of nationwide basis for us.

Also, under his leadership, the company pursued a competent policy, according to which part of the income was set aside for legal settlements and unexpected losses:

Source: Author's elaboration, based on 10-Q report

Thus, we can conclude that despite all the difficulties associated with the legal and financial issues of the settlement, the management of the company does not expect to spend the huge amount of cash that will be required to resolve the opioid crisis. Even if this happens, then the company has reserves that enable the company to cope with this difficult situation.

Long-term debt repayment.

A full analysis of the company's debt burden was detailed in the section "Debt. Is there any progress?"

Macroeconomic risks.

The COVID-19 pandemic that began in 2020, the subsequent adoption of relief packages worth hundreds of billions of dollars, which helped to overcome the crisis, partially contributed to the growth of inflation in the United States and is currently at its highest value in recent years, despite the low interest rate set by the Fed, which is 0-0.5% at the moment.

Source: Trading Economics

One of the popular methods of reducing inflation among economists is to raise the interest rate, which helps to cut costs. However, this can have a negative effect, which will be reflected in the increase in the already huge US government debt.

Source: Federal Reserve Economic Data

In addition, this will lead to a decrease in Teva's profitability and, as a result, may contribute to the deterioration of the financial position of the company, which already has a huge debt.

On the other hand, aware of the continuing negative impact of the COVID-19 pandemic, at the last meeting, Jerome Powell assured the world that the Federal Open Market Committee is not going to raise the rate anytime soon.

However, it should be borne in mind that the upward trend in inflation may continue and, as a consequence, may lead to a more decisive policy regarding the interest rate, although this is unlikely at the moment.

Teva Forecast and Price Target

To determine the target price for Teva, I used a discounted cash flow model, which is based on forecasting cash flow using a discount rate in the future. Although this method has certain limitations, mainly based on the subjectivity of the factors that were included in the model, the 10-Year DCF Model sufficiently allows long-term investors to determine the target price of the company.

Source: finbox

To determine the company's target price, several criteria were taken into account, namely, an enterprise value-to-revenue multiple, which is equal to 3.7x, and calculated on the basis of several large pharmaceutical companies. While the EV / R of Teva is significantly lower and is only 2.2x, which gives an understanding of the underestimation of the company by Wall Street.

Source: Created by author

Also, one of the criteria included in the model was an increase in revenue of 2.5% from year to year. This is a conservative assumption, since on the one hand, we have a significant increase in sales of some patent medicines by 20% from year to year, and the beginning of the commercialization of biosimilars and other drugs in 2023+, and on the other hand, a decrease in sales of Copaxone and some generics.

Source: finbox

Also, when determining the target price of Teva by 2025, I took into account the repayment of bonds under different scenarios, namely,

In addition, my model has limitations, namely, it does not take into account the possible manipulation of the company's shares, the negative impact of rising inflation, a possible increase in the Fed Interest Rate, possible disruptions in the company's supply chain, etc.

Taking into account these limitations and also my assumptions that the company will successfully repay bonds and/or partially refinance debt, begin commercializing biosimilars, expand the use of already approved patent medicines and also taking into account the risks that have been described in this article, then my target price is $27 per share by 2025.

My Investment Strategy

The main goal of any investor is to preserve capital and only a minor goal is to make money. Based on fundamental analysis, taking into account both catalysts and risks, then my strategy will be as follows:

The share of the company will not exceed 1.5% of my portfolio. The initial buy zone for companies' shares will be in the range of $7-$7.5 per share, provided that this happens in one of the following periods:

1. In 2021, then 25% of the planned share, that is, 0.375% of my portfolio.
2. In 2022, then 35% of the planned share, that is, 0.525% of my portfolio.
3. In 2023, then 45% of the planned share, that is, 0.675% of my portfolio.

An important thing to note is that I plan to make an initial purchase of Teva shares only in one of these years. That is, if I buy in 2021, then in subsequent years I will continue to increase my share in the portfolio only according to the criteria from point 3. The remaining share will be invested subject to all of the following criteria:

1. Successful overcoming of the opioid crisis; that is, Teva will be able to resolve the conflict with all plaintiffs and payments under these decisions will not lead to a significant deterioration in the company's financial position.
2. If the financial position of the company does not allow the repayment of bonds in 2023 and/or later, then the company will successfully refinance the debt.
3. The company's shares will be priced below $10 after the above-mentioned factors are met.

I will sell the company's shares when the target price of $27 per share is reached by 2025.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article may not take into account all the risks and catalysts for the stocks described in it. Any part of this analytical article is provided for informational purposes only, does not constitute an individual investment recommendation, investment idea, advice, offer to buy or sold securities or other financial instruments. If any fundamental criteria or events change in the future, I do not assume any obligation to update this article.

Comments

[daniel1234]

Dont worry about debt restructring, all planed debt will go lower, there are call dates for high coupon ones, they will call them back after settlement

[MaxMaz]

If they fix the opioids settlement adequately, there is no way the price will remain below 10$. If you want to buy according your conditions 1 and 3, you will never buy shares in TEVA.

[BondsYield - CFA]

@MaxMaz The investment strategy is frightening.

[Reprehensible]

Here is a plan. Require generics where available. MYL just spent $24 Billion in cash, shares and merger costs to buy 20 now generics with a name on the bottle/box. The deal of acquiring Upjohn, to become VTRS, also included access to China, where TEVA is not active. This just when China is cracking down on prices. The price reduction program they started is being rolled out now to the rest of VTRS products in this second half this year. Expect the cash-strapped rest of the world to note the benefit of this as well. VTRS also received Greenstone generics in the deal, thus acquiring a double helping now of price fixing liabilities. FWIW, I dumped VTRS for these and multiple other reasons as well, and continue to nibble on TEVA.

[bot_92]

@Reprehensible I think Teva is better than Viatris. Or do you think it's the same thing?

[Nathan Aisenstadt]

Good afternoon.

Please note that according to the order of the President of the United States, by August 23, Health and Human Services must submit a report in which it will be “a plan to continue the effort to combat excessive pricing of prescription drugs and enhance domestic pharmaceutical supply chains, to reduce the prices paid by the Federal Government for such drugs, and to address the recurrent problem of price gouging; "

www.whitehouse.gov/...

Thank you for your attention.

[benben245]

Nathan, if Teva fails to fall to 30% below book value, will you refrain from purchasing any shares despite your 157% upside prediction by 2025?

[bot_92]

Interesting article. Thanks.

[Nathan Aisenstadt]

The Federal Circuit said GlaxoSmithKline won a $235 million case against Teva for selling a generic version of the heart drug Coreg.

news.bloomberglaw.com/...

[purplemountaingirl]

GREAT ARTICLE

[Nathan Aisenstadt]

@purplemountaingirl Thank you so much.

[Amby22]

Great article

[Nathan Aisenstadt]

@Amby22 Thank you so much.

I really appreciate it.

[sami_Buffet]

I think that is quite reasonable respectation. Good article!

[Nathan Aisenstadt]

@sami_Buffet Good evening.

Thanks for your kind words.

[TJRyan]

Overly optimistic ya think...

[Nathan Aisenstadt]

@TJRyan Good evening.

General Electric has dealt with huge debt and its stock is up 110% + over the past year.

Teva has the prerequisites to repeat this.

Thanks for your time and comment.

[arok79]

@Nathan Aisenstadt GE has the infrastructure as a huge tailwind. What does Teva have?

[turbo_dog]

@arok79 ge also had a lot of valuable assets that they sold off.

[Greenhorn Investor]

Thank you for the article. The spring continues to coil and the outcome of the opioid settlement could have final say as to whether we blast off or remain coiled forever. Long TEVA.

[Nathan Aisenstadt]

@Greenhorn Investor Good evening.

I agree with you. In any case, the company's management is pursuing an effective policy and Teva has resources to survive the "opioid crisis".

Thanks for your comment and time.

[Greenhorn Investor]

@Nathan Aisenstadt re: Kåre Schultz...I'm a big fan.

[Reprehensible]

Article is mostly a repeat of company reports, but worth reading. The buy/sell strategy is mechanical, complex, and odd. It's better to note that the company is getting better and stay with it, without arbitrary prices and dates. Investors, in general, would be better off following their companies more and their stock prices less.
Those selling are currently disappointed by TEVA not being included in the recent settlement with the deep-pocket companies. The real news is not TEVA not yet being included, but rather 1) a much doubted, near global settlement is possible after all, and 2) the price points are no longer potentially infinity, but rather are reasonable, and a guideline for TEVA.
I like more $ as much as the next guy. If I was the plaintiffs, I might be losing sleep wondering if I could have squeezed Billions more out of the deep-pocket guys. After all, they could still face their shareholders touting how they put all this behind them. I would not lose sleep over wondering if I could have squeezed TEVA (or for that matter, borderline solvent ENDP) for more than perhaps a few hundred million more. As TEVA CEO Kare quips, "I don't have $5 Billion just lying around."

[Nathan Aisenstadt]

@Reprehensible Good evening.

The company's management has 2 main goals, namely to reduce net debt and come to a settlement with the plaintiffs in the opioid crisis.

Thanks for your comment and time.

[DeadManInvesting]

One trifling correction. In discussing the possibility of stock sales, the author states, "Over the past few years, Teva has made public offerings in 2015 at $62.5 per share, up 84% from the current price." The current price is down 84%; the sale price was 525% higher than today's level. More substantially, as the writer has demonstrated with his meticulous report, I think there's a strong case the company is unanalyzable. There are too many moving parts, too many unquantifiable risks, and the author in the end seems to appreciate this with an almost platonic investment plan that will require re-analysis of every salient issue should hypothetical events and prices (such as a $7-$7.50 entry point, was it?) come to pass. But still, a very interesting company, so thank you.

[Nathan Aisenstadt]

@DeadManInvesting Good evening.

As I wrote to another participant in the conversation,

"Given the technical analysis, we are in the $ 6.18-13.5 price range from 2019.
Besides, there is a possibility of a correctional wave.

Taking into account the increase in the number of positive COVID-19 tests by 20% from week to week and other risks described in this article, I expect a decline in the company's shares to the buy zone I indicated."

Thank you for your comment.

[gflander]

@DeadManInvesting I agree - so many moving parts and assumptions, refinancing at what interest rates? I do not understand why he would wait so long to start a position (bankruptcy risk due to debt and/or opioid lawsuits does reduce with time, but share price will increase in that time too), and I do not foresee a $7-$7.50 entry point, and was amazed at a recent opportunity to buy more at $8.26 (the low that day was 8.24). But, we'll see... I've been "awful wrong" before

[WI-TX]

Nice thorough article, I believe $30's to $40's in the next 5+ years is achievable. Let's not forget the aging population in the decade ahead.

[Nathan Aisenstadt]

@WI-TX Good evening.

Thanks for your kind words.

[uechi_ryu_dad]

@Nathan Aisenstadt Thank you for a thoughtful article about Teva. But I don’t understand your buy strategy. You are waiting for Teva to decline by about 25% in share price before investing. What makes you think that the company share price is going to decline by another 25%? Also you want to wait until the opioid crisis is resolved before you invest further. Well then, wouldn’t you have missed the best buying opportunity if you wait until after the resolution in order to invest?

[BondsYield - CFA]

The strategy is to buy the stock 30% below current level? At the lowest historical EV by far? Lol

[Nathan Aisenstadt]

@BondsYield - CFA Good evening.

Given the technical analysis, we are in the $ 6.18-13.5 price range from 2019.
Besides, there is a possibility of a correctional wave.

Taking into account the increase in the number of positive COVID-19 tests by 20% from week to week and other risks described in this article, I expect a decline in the company's shares to the buy zone I indicated.

Thank you for your comment.

[BondsYield - CFA]

@Nathan Aisenstadt

Taking the price range to determine an entry point without knowledge of previous events is a very poor take.

You ll never see TEVA in this price range unless things go very bad on the opioid side. I am sorry but it makes no sense writing a bull article with an entry point 30% below the current price, that is very odd.

$7 implies 6 EV/EBITDA and EV 2bn below the lowest point hit during summer 19 at the height of the opioid fear when there was no global settlement, 4bn additional debt, a 2022 maturity wall and no bio similar pipeline.

Good luck.

[Growth And Value]

@BondsYield - CFA Not to mention the whole Copaxone drama was still playing out. Tough days.

[vulture54]

If they successfully settle the opioid issue (criteria #1), you will not be able to buy the stock below $10. It will be in the 20's !

[Nathan Aisenstadt]

@vulture54 Good evening.

Thank you for your comment.

The most correct strategy is to wait for court decisions.

In any case, the company becomes attractive to long-term investors.

[gflander]

@Nathan Aisenstadt I think the court/"beneficiaries of the $" both don't want to bankrupt TEVA, but be realistically patient to get their money and those free drugs from TEVA over time. They are aware of TEVA's debt too. They would be foolish to kill an already debt-wounded golden goose. But, when people are involved, funny things can happen. I still struggle to fully understand lawsuits and the precedence with the basis of "public nuisance", but where the FDA did not disapprove the drugs or provide guidance or restrictions (still), and Doctors had to write the prescriptions. Not simple, and if they knew how addictive they are without proper warnings, that is indeed wrong.

[purplemountaingirl]

@gflander plenty of competitors would buyout Teva and refinance that debt ...

[GNR8NRG]

Settlement needed to go up

[Nathan Aisenstadt]

@GNR8NRG Good evening.

First, thanks for the comment.
I agree with you.

The CEO of the company believes that the company will be able to reach a settlement within the next year. But due to the ongoing COVID-19 pandemic, the settlement process will take time, most likely slightly more than management plans.
The most important thing is that the outcome of the opioid crisis does not go beyond the planned.

In addition, Endo Pharmaceuticals signed a definitive settlement and resolution agreement for the opioid case in the Circuit Court for Sullivan County, Tennessee recently.

[gflander]

@Nathan Aisenstadt Please tell me more:
Why wait so long to start a position (bankruptcy risk due to debt and/or opioid lawsuits does reduce with time, but share price will increase in that time too), and I do not foresee a $7-$7.50 entry point, and was amazed at a recent opportunity to buy more at $8.26 (the low that day was 8.24). But, we'll see... I've been "awful wrong" before

[gflander]

@Nathan Aisenstadt Another thought - the COVID crisis helped "de-demonize" "Big Pharma" somewhat. And, we will likely need COVID vaccines for a decade as we seek to stay on top of variants. So, the zeal to crush "Big Pharma" may become diminished. (I wonder why young people have not started a campaign against "Big Universities" robbing them of their financial future - talk about a public nuisance - why have Universities escaped culpability - they've increased tuition at a rate greater than inflation for decades??)