TEVA - Teva Pharmaceuticals

[John Hjorth]

Ole Søberg to me appears to be a very competent investor. One the few Danish I actually listen to, when he's interviewed by media. Thank you for sharing, ebdem.

 

Globes [December 10^th 2018] : US drug cartel probe names Teva.

[DooDiligence]

Ole Søberg to me appears to be a very competent investor. One the few Danish I actually listen to, when he's interviewed by media. Thank you for sharing, ebdem.

 

Globes [December 10^th 2018] : US drug cartel probe names Teva.

 

I find Danish people to be very informative  ;)

[John Hjorth]

... As to buying TEVA, WTFK?

Ole Søberg to me appears to be a very competent investor. One the few Danish I actually listen to, when he's interviewed by media. Thank you for sharing, ebdem.

 

Globes [December 10^th 2018] : US drug cartel probe names Teva.

 

I find Danish people to be very informative  ;)

 

Thank you, Jeff, as I take the freedom to read your post as a personal compliment also to me.

 

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This will be an extremely long post, so to the reader - not just Jeff -: Please feel free to skip from here.

 

- - - o 0 o - - -

 

Jeff, our fates as investors are - at least for now - somehow and to some extent joined at the hip because of our in common positions in Berkshire and Novo Nordisk. [However, I think I'm more concentrated in those two names than you are right now.] And somehow the whole thing goes "full circle" here in this post.

 

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Danish Wikipedia : Kåre Schultz.

 

From the Wikipedia article:

... Før dette var han viceadministrerende direktør i Novo Nordisk, men valgte at opsige sin stilling, da Lars Rebien Sørensen forlængede sin kontrakt som tophef, således at Schultz måtte vente yderligere en række år for at kunne overtage posten. ...

 

translates to :

 

... Before that he was SVP in Novo Nordisk, but chose to resign, when Lars Rebien Sørensen prolonged his contract as CEO, so that Kåre Schultz has to wait some further years to assume the position as CEO. ...

.

 

The Wikipedia article [for that particular part] is a fair description of how Mr. Schultz's leave from Novo Nordisk then was communicated by the company, if I remember correctly.

 

Next, among others, this reaction from Danish news media in relation to the release of the Novo Nordisk 2015 Annual Report, which created a public outrage [, which made a lot of sense, based on the communication from Novo Nordisk - a communication screw up].

 

After which Mr. Lars Rebien Sørensen spoke up publicly, in short calling it a firing, based on an inflated ego [short version], thus the large golden handshake/parachute [, & that was the next Novo Nordisk screew up. I suppose this was a token for Mr. Göran Ando being weak, actually. - Instead, fix it with "after mutual agreement..." or something like that, in the first place.]

 

Next, this, about a week after the leave from Novo Nordisk.

 

Mr. Schultz has done extremely well at H. Lundbeck A/S, trimming and shaking it up. However, if you're good - you don't get near the top of Novo Nordisk without being extremely good at what you do - to me, it was an "easy job" for him - for a person like Mr. Schultz - because Lundbeck was prior to Mr. Schultz run for the sake of bureaucrats and scientists, not the shareholders. [i sold my brothers position in Lundbeck yesterday - doublebagger in a fairly short time]

 

Then suddenly, Mr. Schultz moved on to Teva.[ [Link].

 

From the Teva 2018 AGM proxy Link - page not numbered, - p. 67 of 112 in the pdf :

 

... Bonus (2) In connection with the promotion of Mr. McClellan to the position of Interim CFO in July 2017 (before his appointment as Executive Vice President, CFO in November 2017), the Company awarded Mr. McClellan a one-time promotion cash award. The amount reflected in the table above represents half of the full cash award for Mr. McClellan. The remaining half was awarded in February 2018. Dr. Fridriksdottir was entitled to receive payment of the remaining portion of the retention award Teva assumed pursuant to a legacy 2014 Actavis Generics retention plan, and the Company fulfilled its assumed obligation to Dr. Fridriksdottir under the plan during 2017. ...

 

 

Meaning: "Congratulations on your new [interim] job! - Ohh, and by the way : Here is a big bag with money! [Without even haven't devilvered anything yet!]"

 

For Mr. Schultz - same page, just a bit below:

... Under the employment agreement with Mr. Schultz, the Company made two sign-on grants of PSUs, one of which has a three-year performance period and thereafter vests in equal installments generally on the third, fourth, and fifth anniversaries of the date of grant, and the other of which has a five year performance period and thereafter vests in full on the fifth anniversary of the date of grant. In addition, under the employment agreement with Mr. Schultz, the Company made a sign-on grant of RSUs that vest in equal installments on the third, fourth and fifth anniversaries of the date of grant. ...

 

 

, ref. the DKK 100+ M mentioned above in an article linked to by me.

 

To me, it's ridiculous - the slaves are those in the hamster wheel doing all the hard work [well paid or not], not the owners of the capital.

 

Simply put, it reads to me, like it's Christmas year all around in certain parts of Jerusalem.

 

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So to me, seeing Berkshire with a Teva position at EOP 2018Q3 at USD 931 M is a huge mistake, because the position basically collides with Berkshire ground rules and basic values. [Most likely a Mr. Combs or a Mr. Weshler mistake - doesen't matter to me.] -And - most of all - That's no matter the outcome of the Berkshire investment - period.

 

The Teva board appears to me to be marionettes to Mr. Schultz, if the board entered into such agreements, as it actually did.

 

- - - o 0 o - - -

 

Finally, I'm full circle - for us, Jeff.

 

- - - o 0 o - - -

 

Edit: Oh, I forgot: "Kåre" - with regard to pronounciation - in Danish - actually is: "Core". So, in certain Danish circles, Mr. Schultz's goes by the nickname : "Hardcore". [ ; - D ]

[alpha]

 

Any insights into how much this lawsuit will affect Teva?

[Spekulatius]

 

Any insights into how much this lawsuit will affect Teva?

 

It’s going to be expensive (huge fine). Equally important, the generic industry appears to have been overearning for a couple of years and this unlikely will come back.

[DooDiligence]

... As to buying TEVA, WTFK?

Ole Søberg to me appears to be a very competent investor. One the few Danish I actually listen to, when he's interviewed by media. Thank you for sharing, ebdem.

 

Globes [December 10^th 2018] : US drug cartel probe names Teva.

 

I find Danish people to be very informative  ;)

 

Thank you, Jeff, as I take the freedom to read your post as a personal compliment also to me.

 

- - - o 0 o - - -

 

This will be an extremely long post, so to the reader - not just Jeff -: Please feel free to skip from here.

 

- - - o 0 o - - -

 

Jeff, our fates as investors are - at least for now - somehow and to some extent joined at the hip because of our in common positions in Berkshire and Novo Nordisk. [However, I think I'm more concentrated in those two names than you are right now.] And somehow the whole thing goes "full circle" here in this post.

 

- - - o 0 o - - -

 

Danish Wikipedia : Kåre Schultz.

 

From the Wikipedia article:

... Før dette var han viceadministrerende direktør i Novo Nordisk, men valgte at opsige sin stilling, da Lars Rebien Sørensen forlængede sin kontrakt som tophef, således at Schultz måtte vente yderligere en række år for at kunne overtage posten. ...

 

translates to :

 

... Before that he was SVP in Novo Nordisk, but chose to resign, when Lars Rebien Sørensen prolonged his contract as CEO, so that Kåre Schultz has to wait some further years to assume the position as CEO. ...

.

 

The Wikipedia article [for that particular part] is a fair description of how Mr. Schultz's leave from Novo Nordisk then was communicated by the company, if I remember correctly.

 

Next, among others, this reaction from Danish news media in relation to the release of the Novo Nordisk 2015 Annual Report, which created a public outrage [, which made a lot of sense, based on the communication from Novo Nordisk - a communication screw up].

 

After which Mr. Lars Rebien Sørensen spoke up publicly, in short calling it a firing, based on an inflated ego [short version], thus the large golden handshake/parachute [, & that was the next Novo Nordisk screew up. I suppose this was a token for Mr. Göran Ando being weak, actually. - Instead, fix it with "after mutual agreement..." or something like that, in the first place.]

 

Next, this, about a week after the leave from Novo Nordisk.

 

Mr. Schultz has done extremely well at H. Lundbeck A/S, trimming and shaking it up. However, if you're good - you don't get near the top of Novo Nordisk without being extremely good at what you do - to me, it was an "easy job" for him - for a person like Mr. Schultz - because Lundbeck was prior to Mr. Schultz run for the sake of bureaucrats and scientists, not the shareholders. [i sold my brothers position in Lundbeck yesterday - doublebagger in a fairly short time]

 

Then suddenly, Mr. Schultz moved on to Teva.[ [Link].

 

From the Teva 2018 AGM proxy Link - page not numbered, - p. 67 of 112 in the pdf :

 

... Bonus (2) In connection with the promotion of Mr. McClellan to the position of Interim CFO in July 2017 (before his appointment as Executive Vice President, CFO in November 2017), the Company awarded Mr. McClellan a one-time promotion cash award. The amount reflected in the table above represents half of the full cash award for Mr. McClellan. The remaining half was awarded in February 2018. Dr. Fridriksdottir was entitled to receive payment of the remaining portion of the retention award Teva assumed pursuant to a legacy 2014 Actavis Generics retention plan, and the Company fulfilled its assumed obligation to Dr. Fridriksdottir under the plan during 2017. ...

 

 

Meaning: "Congratulations on your new [interim] job! - Ohh, and by the way : Here is a big bag with money! [Without even haven't devilvered anything yet!]"

 

For Mr. Schultz - same page, just a bit below:

... Under the employment agreement with Mr. Schultz, the Company made two sign-on grants of PSUs, one of which has a three-year performance period and thereafter vests in equal installments generally on the third, fourth, and fifth anniversaries of the date of grant, and the other of which has a five year performance period and thereafter vests in full on the fifth anniversary of the date of grant. In addition, under the employment agreement with Mr. Schultz, the Company made a sign-on grant of RSUs that vest in equal installments on the third, fourth and fifth anniversaries of the date of grant. ...

 

 

, ref. the DKK 100+ M mentioned above in an article linked to by me.

 

To me, it's ridiculous - the slaves are those in the hamster wheel doing all the hard work [well paid or not], not the owners of the capital.

 

Simply put, it reads to me, like it's Christmas year all around in certain parts of Jerusalem.

 

- - - o 0 o - - -

 

So to me, seeing Berkshire with a Teva position at EOP 2018Q3 at USD 931 M is a huge mistake, because the position basically collides with Berkshire ground rules and basic values. [Most likely a Mr. Combs or a Mr. Weshler mistake - doesen't matter to me.] -And - most of all - That's no matter the outcome of the Berkshire investment - period.

 

The Teva board appears to me to be marionettes to Mr. Schultz, if the board entered into such agreements, as it actually did.

 

- - - o 0 o - - -

 

Finally, I'm full circle - for us, Jeff.

 

- - - o 0 o - - -

 

Edit: Oh, I forgot: "Kåre" - with regard to pronounciation - in Danish - actually is: "Core". So, in certain Danish circles, Mr. Schultz's goes by the nickname : "Hardcore". [ ; - D ]

 

Holy moly, I just saw all your edits re: NVO

 

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In other news:

 

Teva must maintain the legacy of integrity handed down by Phillip Frost.

 

https://www.cnbc.com/2018/12/28/biotech-billionaire-philip-frost-agrees-to-proposed-judgment-in-sec-case.html

 

---

 

Are they just playing darts in Omaha?

[Spekulatius]

TEVA is just a somewhat milder version of Valeant. Lots of Acquisitions, lofty growth targets, price gouging, high debt - the ingredients of hubris are there in both, albeit expressed differently. I think TEVA will survive, but it sure isn’t pretty.

I think TEVA screened better, so it sucked a different blend of value investors down its toilet bowl.

[kab60]

TEVA is just a somewhat milder version of Valeant. Lots of Acquisitions, lofty growth targets, price gouging, high debt - the ingredients of hubris are there in both, albeit expressed differently. I think TEVA will survive, but it sure isn’t pretty.

I think TEVA screened better, so it sucked a different blend of value investors down its toilet bowl.

Their prior management was garbage and the acquistion of Actavis' generics divison was obviously a gigantic cluster fuck, but it's not like acquistions is a part of the playbook under their new management. Kåre Schultz seems to be doing all the right things (not getting strongarmed by Israeli politics, consolidating production facilities, reducing costs, focusing on Austedo and Ajovy). I'm not long, I could never get there on valuation, and it seemed consensus was he could do like at Lundbeck, but I do understand the attraction. The big question is whether or not Austedo and Ajovy will be blockbusters and more than make up for Copaxone and whether or not Kåre is able to increase margins. He seems to think so (and he knows a thing or two from his time in Novo and Lundbeck about raising prices), but he sure is getting hit with a lot of shit outside of his control.

[John Hjorth]

Holy moly, I just saw all your edits re: NVO...

 

... Are they just playing darts in Omaha?

 

Jeff,

 

Perhaps I got carried away a bit on December 12^th 2018. My points still stand. Personally, I simply don't like Mr. Schultz because of his personal behavior, -to me - in short, Mr. Schultz is taking care of Mr. Schultz, not the owners of TEVA.

 

Also ref. Spekulatius' last post in this topic, there seem to be similarities to Valeant. TEVA seems to be yet another turn-around, that hasn't turned. [At least so far.] That said, the new pricing case is a turd that landed on Mr. Schultz's desk from the past.

 

- - - o 0 o - - -

 

I really hope, that Mr. Buffett or one of the Berkshire CIOs [whoever has bought it] have come to their senses, and have dumped this thing by now. Tomorrow will perhaps tell. - It's just so non-Berkshire.

[schin]

Has anyone revisited TEVA as an investment lately? Seems interesting in terms of paying down debt and stabilizing again.

[kab60]

Yep, think it looks interesting. Say they do 2b of FCF a year and we get to 14b net debt in 2025 or less than 3xebitda.

 

Say they don't grow revenues or margins (which they expect), equity should be a double all else equal (holding EV constant at 24b).

 

But FCF would be higher from lower interest payments and credit risk would be pretty much gone, which could open for buybacks or dividends - completely changing the narrative.

 

I also expect them to increase margins as guided by Kåre, so not difficult to imagine a 3x from here over 5 years.

 

Risks are they gut R&D too hard and damage long term prospects, but in five years (somewhat happened at Lundbeck) they should have headroom to invest more if needed. Or their launches fail, costs increases and new legal cases keep popping up.

 

[kab60]

They're sticking to their guns and basically laid out the math in todays conference call.

 

"We will probably have a cash flow $2 billion, $2 billion-plus per year. And we'll allocate the cash flow to debt reduction. So that means in the next years, we'll take some $6 billion plus out of our debt. And that, of course, you said the math is quite straightforward that EBITDA should be around $6 billion. And the way to get to that EBITDA is also pretty straightforward because we've already sort of explained to you what we think the operating margin will be because that's going to be 28% in the end of the period. And then, of course, you can calculate, as you rightly did, that we need a low single-digit growth in revenues in order to get to there. And that's what we believe we can do. And the reason why we believe we can do it is what I explained to rumor based on question with the various elements going in and contributing to a combination of stability and growth. And when you add all that up, you get to single-digit growth rates on the revenue. So that's really our plan."

 

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Say they get to 6b ebitda in 2023, 18b net debt, that implies an ev/ebitda multiple of less than 6 for a business which has often traded above 10x and should probably throw off more than 3b FCF which by then can be returned to shareholders.

 

The litigation cloud will eventually by lifted, I think that's a matter of pretty low risk, medium sized uncertainty.

 

The real risk is they can't get the business to grow, but Kåre is a guy that gets things done and he's extremely incentivized to make this thing work. He was expected to be CEO at Danish Novo Nordisk but couldn't wait for his time, now he's stuck in Israel and will do anything he can to make this a big success - both to stroke his personal ego but also his finances. He has a lot of money, in a Danish context, on the line. They have interesting launches on the way, so I think they'll get the thing to grow again, and then I think he has downplayed the ability to raise margins. He's still sticking to his 28 pct. ebit-margin target, which he announced in 2017 (he has been extremely consistent since he took over).

 

From todays CC:

 

Here, you can see how the band for the operating margin is now somewhere between 25.5% and 26%. And you also see our long-term financial target of 28% in 2023. And this is a target that we set more than 2 years ago, just after I joined Teva. And this is a target we are firmly committed to. And all our optimization of the business is driving towards achieving this target, which is very, very doable.

 

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I actually think their execution has been very impressive under Kåre, but litigation seems to make nobody care. He's obviously frustrated as well.