Teva Pharmaceutical Industries Ltd (TEVA)

[NoMoDo]

IMO the recent reversal (up from 6.20) has little or nothing to do with Hydroxychloroquine. In 2016 the company bought Allergen in hope of sustaining income after it's main drug's patent expired. The move caused 40 billion in debt and didn't help the bottom line. Further, the EU didn't like the merger and forced them to divest. While buried in debt, the company faced several lawsuits including one for opiate sales. The huge company faced bankruptcy.

The company replaced a questionable CEO with one who was known to save dying companies. He managed to cut debt from over 40 bil to about 24 bil within 3 years. The company also settled most of their lawsuits. The main one - involving opiate sales, is being negotiated and the plaintiffs have agreed in principle to 26 bil worth of anti opiate drugs and 240 mil in cash over 10 years. The company also cut about 3 bil worth of corporate waste.

With the last 10k, the company showed that it was able to meet its budget and will likely emerge a healthy company within about 5 years (or less). It is holding about 1.2 bil in cash for the opiate settlement, but hopefully won't need it. On the negative side, they just borrowed 2 bil at about 5% interest - adding about 75 mil a year to their interest, to pay off current portion of debt. In addition, their revenue has been on the decline and new drug offerings will likely pay for about 60% of the deterioration of their top drug.

On the positive side, the crazy reduction to debt will free up cash flow and allow the company to pay down more debt. As legal fees should get reduced - assuming the opiate problem gets resolved, that money will also likely go to debt reduction. If we see more than 2 bil in reduction in the first quarter, it should be a huge positive.

The price of the stock will likely be back to $70 range within the next 3-5 years if they maintain their current trajectory. Great payout if anyone is willing to sit around that long. As investors are coming to the realization that the risk involved in this stock has been largely controlled, the price is beginning to rise.

My personal opinion is that hedge funds are likely buying at the moment. This is a good stock for fund managers to buy and hold considering the potential return - stock is hugely undervalued by all metrics. Capitol Research just purchased 130 mil shares. Here is the list of fund management companies that are holding as of Dec 31, 2019:

https://www.holdingschannel.com/bystock/?symbol=TEVA

Of special note is Warren Buffet's Berkshire hathaway owning $423 mil worth and Blackrock's $353 mil. Also, UBS announced yesterday that the price is artificially low due to incorrect valuation of risk. UBS owned $18 mil worth on Jan 1. I bet that number is growing as we speak.

Now, to the response to the post... Hydroxychlroquine is produced by TEVA. They promised to donate 6 mil tablets by last Tuesday. The donation won't do anything to the bottom line...right? I am guessing that they have worked out a deal with the gov to donate this drug as part of their opiate lawsuit. It would be a huge win for both sides as the reduction of production frees up time to get HCQ in record time. If they did make a deal - for leniency, it would be better than charging full price for the drug now as the lawsuit will be reduced or eliminated from the books.

Since I have only put in about 10 hours of review in this stock (found it 3 weeks ago), if I have missed anything or if any info is wrong, please correct me.