There is a worldwide shortage of cheap remedies, and the main producers are Mylan and Teva. They have been suffering from low prices dictated by the regulators, who never think about what are doing. Teva is very cheap, I bet it will survive the oxycontin issue and repay its debts, and become profitable again.
PS next day: TEVA continues to drop on TASE. In politics I am "oficialista" (always vote for the party in power) and in the bourse, contrarian.
PS next day: TEVA continues to drop on TASE. In politics I am "oficialista" (always vote for the party in power) and in the bourse, contrarian.
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ReplyDeleteAlthough TEVA will survive, there's a good chance TEVA shares are worthless. The bondholders will take TEVA away from the shareholders. At least wait until you can get them cheaper.
ReplyDeleteYour argument is powerful, Nim. TEVA's net worth may be zero, but it is still a going concern fulfilling a vital niche in the medical business. It cannot be replaced should it disappear. Would you buy Made in India blood-pressure drugs?
DeleteDefinitely wouldn't want Indian made drugs. But there are plenty of generic manufacturers in Europe, Japan, and USA, and TEVA is not going out of business. The main issue is that Teva owes about $27 per share. So for every $8 share you buy you are assuming $27 of debt. And the debt holders aren't willing to wait around forever to be paid. At some point they'll just take away your shares!
ReplyDeleteSomebody must have been reading this blog because TEVA just added 2% to its worth at the end of today's TASE trading. Reading and carried away by my optimism. So I am not alone.
Deleteregarding generic manufacturers - except Mylan, no one is on TEVA's level or has its distribution network. Generic manufacturers are supposed to be naked and without a moat, but I think its experienced factories (all with regulatory approval) and well-oiled distribution system (including contracts and middlemen that took a generation to develop) cannot be replaced - if serious shortage of the most common remedies is to be avoided. I throw into the balance also its effective lobbying organization. The oxycontin problem is ridiculous, no law was broken, once a new scandal will appear, TEVA's lawyers will settle the case. BTW the Sacklers made a huge mistake by accepting culpability. The new generation lacks the iron stamina of the founder brothers.