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Teva's Strategy For Success

|Includes: Teva Pharmaceutical Industries Limited (TEVA)


Last year is in the past.

New plans released.

Better roads ahead.

Teva Pharmaceutical Industries is an Israel-based manufacturer of generic drugs, and their share price was higher by 27% during December, 2017. The reason for the move appears mostly tied to a restructuring announcement.

Teva had a difficult time in 2017. It wound up having to replace its CEO, and its brand-name multiple sclerosis drug Copaxone began facing generic competition. Then it's been buried under $30 billion in debt. As a result, Teva cut its previously delectable dividend by 73% during the summer, and it's trimmed its fiscal 2017 profit forecast a few times.

Having already struck some deals to divest its women's health operation, and with numerous other levers yet to be pulled. Teva should be able to make better than expected results in expenditure cuts by the end of 2019. With $30 billion in debt currently, and the company still likely to produce $2 billion or more in annual operating cash flow, we would expect to see debt levels down to around $25 billion by the end of 2019. This should be enough to give the company s boost.

On the first of the year Teva hiked prices on seven drugs with increases ranging from 2% to 9%. Some of those hikes come during a tumultuous time as it works to cut operating costs and lay off hundreds of employees. The price hikes were focused on its branded drugs, including respiratory therapy Pro Air Respiclick and Parkinson's therapy Azilect.

Generic drug prices are liable to remain weak throughout 2018 and it's only going to have select instances where it will be able to pass along prices to its customers. Teva seems to have volume in its favor over the long run because the global population is aging and more doctors are turning to generics than ever before.

Allergan on Monday provided guidance for 2018 that came in below market expectations, sending its stock lower in extended trading, as the drug maker said it would continue to sell its remaining holding of Teva Pharmaceuticals, including through its forward sale agreement with J.P. Morgan for 25 million of the 100 million Teva securities with a February 2018 maturity date, adding that it plans to sell its remaining position in 2018 through forward sale agreements and open market sales.

Teva is expected to reduce costs and operating expenses by $2Billion by the end of 2019, by restructuring debt and laying off 10% of it's workforce.

After Allergan sells it's remaining Teva holdings there should not be anymore downside pressure on Teva  for the next few years because Investors will be betting on the upside potential as the cost reduction plan gets is implemented and gets traction.