xtreeq Posted May 23, 2017 Share Posted May 23, 2017 Forgot to subtract the dividend payments (~$1.5B) and some percentage of the Copaxone FCF (if I remember correctly it's ~$1.5B a year) to adjust to the coming generic competition. My guess would be that they will have about $3B to reduce debt. Link to comment Share on other sites More sharing options...
no_free_lunch Posted May 24, 2017 Share Posted May 24, 2017 The FCF would already account for interest but not dividends. So that drops it down. I assume that copaxone pain should be reflected in FCF numbers but perhaps not. Ok, so this one does have some warts on it, for sure. You don't get a stock at a 10 year low in the middle of a huge bull without some problems. The acquisition of allergan generics appears to be one of the worst purchases in corporate history so there is that as well. They do have a portfolio of non-generics so some potential upside from that. There is also a bit of a stabilizing element when the new CEO arrives. There has also been so much negative news that it could move up just due to it towing the line for a couple quarters. As a result of the debt there is some risk in Teva which makes me think that calls are the better strategy. If revenue deteriorates then with the current level of debt it will get very ugly. However if they can stabilize earnings then it should be a $40-50 stock. Not great upside/downside from the stock perspective unless you are confident they will succeed but much better from the option side. Link to comment Share on other sites More sharing options...
rb Posted May 24, 2017 Share Posted May 24, 2017 At the current price I don't think that the debt is that big of a problem. Yes, the debt is high but it's not an existential risk. The bigger risk is the risk of more stupid decisions. The new CEO is an unknown substance. So you don't know if he has any more "transformative" acquisitions/ideas. If i knew for sure that the company had its "road to Damascus" experience and is comitted to clean up its act and do better then it would be a buy here. But I'm far from convinced that this is the case here. There's way too much talk of M&A and fin engineering in the pharma space these days and that's scary. Link to comment Share on other sites More sharing options...
no_free_lunch Posted May 24, 2017 Share Posted May 24, 2017 One thing on the management is they are looking globally for a candidate. That does not guarantee management will be shrewd capital allocators but it increases the odds in my mind. I just think there is a decent margin of safety at the current valuation. Link to comment Share on other sites More sharing options...
nkp007 Posted September 21, 2017 Share Posted September 21, 2017 http://www.barrons.com/articles/teva-pharmaceutical-stock-could-double-1505993839?mod=hp_highlight_1& After this whole saga, Teva currently trades 65% lower than its 52-week high. Sure the situation is very messy, but Teva is trading at a levered 27% forward free-cash-flow yield. At this price, you’d expect there to be some fatal risk or rapid secular decline, but the street’s consensus expects free cash flow to remain stable around $5 billion per year through at least 2020. Nobody knows what the drug industry will look like in 2020, but even if the bottom falls out, the stock can still fetch $25 a share in 2020--almost 40% upside from today. Hypothetically, let’s imagine generic manufacturers buckle to purchasers, Teva’s pipeline runs dry and free cash flow gets cut to half of consensus estimates. At this new bottom, if we apply a 10 times multiple to these dismal levered free-cash-flow figures we still get a $25 billion equity value compared to today’s $18.8 billion market cap. If the market stabilizes and Teva successfully reorients its strategy towards branded drugs, this could easily be a multi-bagger. For the sake of building in a massive margin of safety, in valuing the stock I start with the already-pessimistic 2020 consensus earnings-per-share estimate of $4.60 and strip out the 2020 EPS contribution of $1.33 from Teva’s blockbuster multiple-sclerosis drug, Copaxone. Copaxone sales will eventually erode as it faces generic competition, but it is hard to tell where earnings will stabilize. We end up with $3.27 adjusted EPS for 2020. Assuming an inauspicious 10 times price/earnings multiple for a business that is expected to have stabilized gets us to a 2020 price target of $33. Using even more conservative forecasts in the appendix, I estimate $3.45 EPS in 2020 with Copaxone’s earnings before interest and taxes (Ebit) falling 70% by then. The average between these two approaches represents 100% upside from today’s price (23% internal rate of return (IRR)) over a three-and-a-third years period. A large degree of conservatism is baked into my forecasts to compensate for the high level of uncertainty associated with Teva’s business today. As the smoke of uncertainty clears, it may be possible to underwrite higher assumptions with serious upside Link to comment Share on other sites More sharing options...
no_free_lunch Posted September 21, 2017 Share Posted September 21, 2017 I bought into this company via calls awhile back and got lucky enough on timing to actually make money on the thing. However, during the process I have researched them enough that I would be cautious. Even though it is much lower now there is the basic fact that the management is very questionable. The allergan acquisition appears to be one of the worst I have ever seen. They spent $40B and yet haven't seen any increase in revenue? I will say that one more time, $40B and no increase in revenue. I know that the existing business must have been entering a huge decline but still, at least they had a nice clean balance sheet before. I like the stock price, yes, but I don't trust management. I don't know, maybe it's worth another swing with LEAPS but it seems speculative to me. Link to comment Share on other sites More sharing options...
kab60 Posted September 21, 2017 Share Posted September 21, 2017 I'm still discussing with myself whether or not to take a position. I'm very tempted due to the new CEO, whom I "know" well as a Dane following both Novo Nordisk and Lundbeck. For me it would be somewhat of a jockey bet, but I like the odds. The one thing I don't like is how much of his compensation is front loaded (big sign-on bonus). I'd prefer Schultz was just stuffed with options. Having a good idea about how he works, I believe he'll be able to handle the board which seems pretty useless, but it's not a given (thus I'd prefer more options/shares). I'm also not really sure what to think of generics competion, but Teva has been around for more than 100 years, so I'm inclined to think the worst is already priced in and that they'll manage. They borrow money at around 1-2 pct. interest, so my first inclination is that equity investors have overreacted. Link to comment Share on other sites More sharing options...
nkp007 Posted September 21, 2017 Share Posted September 21, 2017 I took a position in the 2019 calls at $15 strike. Lots of potential levers to pull, but I agree that it's a bit more speculative and thus ideal for LEAPs. Link to comment Share on other sites More sharing options...
txvalue Posted October 13, 2017 Share Posted October 13, 2017 Any other intrepid folks dipping their toes in here? I like the new CEO on paper, they plan to cut quite a bit of overhead, selling off non core parts to pay down the debt load. I think the challenges are priced in with this trading in the 14's. There was an estimate that cutting 5k jobs would save $2 billion and they are cutting 7k jobs. They could potentially save $3 billion/year between this and the dividend cut. I think the debt schedule for the next 4-5 years is manageable as a result. Link to comment Share on other sites More sharing options...
txvalue Posted November 2, 2017 Share Posted November 2, 2017 Has anyone seen my toe? :D Hopefully this was the last kitchen sink quarter with the new CEO "starting" yesterday. Adding a bit more at these levels. Link to comment Share on other sites More sharing options...
kab60 Posted November 2, 2017 Share Posted November 2, 2017 I don't think this was the kitchen sink quarter, I think there is more to come, but I expect it alongside a major overhaul and restructuring announced within 100 days. I have never done options but am compelled to place a bet, since I expect it to pop when announced. Link to comment Share on other sites More sharing options...
txvalue Posted November 2, 2017 Share Posted November 2, 2017 If history is a guide - at Lundbeck Schultz took 3 months to provide a restructuring plan. So maybe something comes out in early February, which could be why they were so hesitant to speak to 2018 on the call. The shares Lundbeck shares went from 130ish to 400+ in his tenure that began in 2015. Link to comment Share on other sites More sharing options...
kab60 Posted November 2, 2017 Share Posted November 2, 2017 Yep. But Lundbeck had less debt, a bloated cost structure and specialty pharma that Kåre knew how to take advantage of due to his tenure at Novo. He slashed costs and raised prices aggressively. Anyone have a view on Tevas cost structure and how much cost he can take out? Seen any estimates? I think that is key, since figuring out generic pricing is probably futile. They seem to have some okay stuff in the pipeline (2x1b sales plus it seems but starting at a low level in 2018 and takes years to ramp, so won't save them from debt downgrade). Link to comment Share on other sites More sharing options...
John Hjorth Posted November 2, 2017 Share Posted November 2, 2017 There is no doubt that Mr. Schultz is a very efficient and competent operator. His task at TEVA now is however totally different from what was his task at Lundbeck A/S and for that sake also at Novo Nordisk A/S earlier. At Lundbeck it was about cleaning up business and the pipeline - what to shut down, what to sell, to shape and focus the company, and then also to give economics priority to science, to cut organisational slack. TEVA is mostly a generics pharma, I suppose, where Mr. Schultz earlier used to work with innovative pharma companies. And then there is this debt mountain in TEVA. It's a different game for Mr. Schultz now going forward. Link to comment Share on other sites More sharing options...
Txvestor Posted November 2, 2017 Share Posted November 2, 2017 It’s going to be tougher at TEVA for one simple reason, pricing power. Generics have very little due to low barriers to entry and competition. A large part of TEVA earnings was branded drugs. It’s all about pricing power in the pharma industry as the price differential and margins are crazy on branded drugs. Their debt load with lack of earnings power makes me nervous to go anywhere near it. If I had to pick I would probably go with VRX over them. VRX appears to be having some early success delevering. Link to comment Share on other sites More sharing options...
txvalue Posted November 15, 2017 Share Posted November 15, 2017 A few recent events aside from the flood of downgrades: - Len Blavatnik has been rumored to be mulling a large investment. Two business news outlets are speculating that it could be a private placement, buying Allegran shares or something else. $3 Billion was the number used in the reports. Teva owns a 20% stake in Clal Biotech which is a subsidiary of a Blavatnik company. - Allegran announced they will sell a quarter of their Teva shares (25M Shares) in Q1 2018. They currently hold about 10% of the outstanding shares. - David Abrams formerly of Baupost bought just under 22M shares based on Abrams Cap's latest filing. It is his second largest disclosed filing. Link to comment Share on other sites More sharing options...
UK Posted December 19, 2017 Share Posted December 19, 2017 http://ir.tevapharm.com/phoenix.zhtml?c=73925&p=irol-presentations Thank you. So if we talk about the top line and how to assist that and maybe also the execution of the restructuring, then, I think, it's fair to say that I'm traditionally conservative on that. So you would not find that I would be basing this analysis on a very optimistic outlook for revenues. And I think you will also find that I'm pretty conservative and strict on implementation of restructuring. So it would be very surprising if we did not meet the exact targets in terms of cost reductions. So I think on that, I can tell you, it's conservative on both accounts. Thank you very much, Chris. Good questions. With regard to the optimization, I can't get into the very specific details, but being an old consultant, I can tell you the 80-20 rule probably applies here as anywhere else. So that basically means that 20% of your products will make up 80% of your profits, that's quite normal for all pharmaceutical companies. And I'm sure it's also the case here. And that is, of course, not where you're looking. You're looking at the tail end where I'm sure that probably, the last 20% of your products might make up 80% of your losing products. And that's why you're going to be looking. So you take it from the tail so to speak, you look at the least profitable products and that's where you're going to start. And I think it happens in all industries, if you have a very broad portfolio. And if nobody is really focused on it, then it's not the most popular thing to do to be looking at the loss-making products and making sure that they get optimized. It's more fun to launch a new product at a high price and make a big splash out of that. So I'm a believer in that you should optimize everything, and that's why I'm also focusing in that end. And hopefully, that is something that can lead to better total profitability of the portfolio. In terms of the assets, then I'm also a believer in keeping all the good products we have. All the good assets we have in terms of actual products we're supplying. So you will not see us doing big asset sales that are linked to pharmaceutical product sales, so to speak, the generic or specialty pharmaceuticals. But you will see us look at sort of side things like, it could be distribution or could be other, sort of, side businesses that are not directly linked into product sales. Thank you very much. So on the manufacturing footprint, it is, of course, no secret that Teva's manufacturing network is the result of numerous acquisition and mergers of the company over a long period of time. And roughly, today we have around 80 manufacturing sites. Now with my sort of insight into the volumes we do and how we do them and my insight into manufacturing over many years, pharmaceutical manufacturing, if you took it the other way around and said if you start it from scratch, how much would you have? You'll probably have 2 to 4 API sites, and you'll probably have 6 to 8 finished manufacturing sites with different technologies to cover broadly. So there would be sort of -- around sort of 8 to 12 sites all together. Now that's not realistic where we're coming from historically. But it's just to give you a feel for that there's a big difference between the setup we have and what would be the ideal setup. Then, of course, it's also well known that it takes time. It's costly to establish pharmaceutical manufacturing. And therefore, in that total optimization, we will most likely not go from 80 to 12 in the next 5 years, right? But we will move in that direction. So directional, you should expect us probably over the next 10 years to keep on moving in the direction of consolidation, optimization, improvement of our manufacturing network. Yes. Is that your question? That's great, Tim. So I'll give you my completely subjective take on it, right. I think, it's a 2-year turnaround restructuring. So in 2 years from now, it's going to look good. If we do well, then in 5 years, it's going to look great. But I can guarantee you in 2 years, it's going to look good because we will be handling the debt. We will be handling the operational challenge of declining revenues on COPAXONE and generics. But in the meantime, we will be sort of doing everything to regenerate growth from AUSTEDO, from fremanezumab, from a beta and more-focused generic strategy and execution. And that's why I'm saying that 2 years from now, we will have the cost down, we'll have optimized the operational performance. But the real sort of the big development in a positive sense then -- will then be 2 to 5 years out. So good in 2 years, and hopefully, great in 5 years. Link to comment Share on other sites More sharing options...
John Hjorth Posted December 19, 2017 Share Posted December 19, 2017 Danish [TEVA] CEO rejects Netanyahus begging for dropping redundancies. Politics is politics - business is business. Link to comment Share on other sites More sharing options...
LightWhale Posted December 28, 2017 Share Posted December 28, 2017 Danish [TEVA] CEO rejects Netanyahus begging for dropping redundancies. Politics is politics - business is business. They'll have to cut even deeper. If I recall correctly, Teva has to repay about $9B of debt in the next couple of years, that's about 50% of market cap. And beyond debt, generic pricing will certainly go lower. In pressing for shorter approval time by the FDA, generic companies made a classic game theory move, where all participants try to improve their situation at once and therefore everyone is worse off - more drugs coming faster in to the market -> more competition on all fronts -> lower margins. Copaxone 40mg is quickly losing ground as well, with estimates anywhere from 25%-45% by the end of 2018. The credit markets are already assigning Teva non-investment grade yields. So equity issuance is not unlikely sometimes next year. IMO, after talking to ex-management, the failing acquisitions came from unrealistic growth targets - doubling revenue every 4Y equates to ~18% annual growth - which attracted a particular shareholder base and put them under the gun. Without acquisitions, they would have witnessed a gradual decay. So the Actavis purchase was dictated by top shareholders with a Wall Street mentality (bonuses in the upstate and nothing to loss in the downstate) that decided to gamble big. Link to comment Share on other sites More sharing options...
txvalue Posted December 29, 2017 Share Posted December 29, 2017 Everyone thinking this idea will never work while Teva pops from 11 to 19. Just a reminder that when everyone is saying something won't work the idea is often worth a second look. I started buying a bit early but kept buying and have now sold 90% of my position for a nice gain. The rest I am going to hold to see how things play out. They obviously have a painful slog ahead of them to "fix" things, but there is plenty of room for efficencies to be realized. Edit for clarity: I primarily mean the analysts not those on the board. Link to comment Share on other sites More sharing options...
black-dog Posted March 29, 2018 Share Posted March 29, 2018 So we're a month and a half after BERK's buy of TEVA hit, and I'm still unable to figure out what their thesis is. At the time having Cramer slag it ("It is amazing that Warren Buffett goes for what I largely regard as the worst of the worst.") made me want to invest, sure, but besides snarky (if profitable) Cramer-contrarianism, but beyond that -- has anyone read a good case for why they'd make that investment? Link to comment Share on other sites More sharing options...
kab60 Posted March 30, 2018 Share Posted March 30, 2018 Ruthless operator? 3B projected cost savings? Pipeline? :) Link to comment Share on other sites More sharing options...
DooDiligence Posted April 1, 2018 Share Posted April 1, 2018 I think that WEB & Mung should to go to lunch with Phillip Frost (could be an interesting conversation.) (i'm aware that he's not a manager at TEVA anymore. Just saying...) https://en.wikipedia.org/wiki/Phillip_Frost I'd like to hear what Chuck would say about him. As to buying TEVA, WTFK? Link to comment Share on other sites More sharing options...
UK Posted September 15, 2018 Share Posted September 15, 2018 https://www.reuters.com/article/us-teva-migraine-fda/u-s-regulator-approves-teva-migraine-drug-shares-rise-idUSKCN1LU2TU Link to comment Share on other sites More sharing options...
ebdem Posted December 11, 2018 Share Posted December 11, 2018 Maybe you like that presentation on TEVA: Link to comment Share on other sites More sharing options...
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