UBS analyst Nevine Jacob believes there will be no impact on the extent of Teva's compromise in Oklahoma, and it is probably only a procedural matter, so the sharp decline in the share is unjustified. UBS continues to recommend Teva as a "neutral" recommendation with a target price of $ 12, which is 38% higher than the current price.
Oppenheimer, the investment bank that went against the trend and raised its recommendation for the share to "over-yield" a few days ago, believes that weakness in the share constitutes an attractive entry point for investment in Teva.
Teva shares fell yesterday more than 4% below $ 8.7 per share in the New York Stock Exchange, and a 20-year low. In a report, Cleveland District Court Judge Ted Blackman declined to accept the agreement Teva signed with Oklahoma to settle the painkillers.
Teva has agreed to pay $ 85 million to settle the case without admitting guilt. However, the District Judge refused to approve the arrangement at this stage, and demanded further information from the State of Oklahoma on the distribution of funds to be paid by Teva to ensure that the arrangement does not violate the laws of the state. Blackman stressed that he wanted to publish the information to the public.
Investors' confidence in Teva has eroded over the past two years due to failed acquisitions, led by the acquisition of generic division of Allergen, which left Teva with a debt that is now limited to $ 28.7 billion. The US generic drug price crisis that exploded last month did not add to the negative sentiment when 44 countries sued 20 companies and drowned them on suspicion of price fixing.
At the weekend Fitch credit rating agency lowered the rating of Teva's bonds from BB to BB minus and set a negative outlook for them. This means that the rating company expects the next change in the rating to be an additional one.
Fitch explained that the downgrading of the rating reflects its assessment that the ratio between the Company's gross debt level and its gross operating profit (EBITDA) will remain above 5 even after 2020 due to slower than expected growth in the Company's revenues, continuing difficulties in reducing the Company's costs, Of the generic drugs and the amounts Teva is expected to pay in order to settle the outstanding claims against it. Among the claims against Teva were its alleged responsibility for the epidemic of addiction to narcotic painkillers in the United States and the lawsuit filed against it and 18 other generic drug manufacturers for price adjustments of 112 generic drugs.
Teva is struggling with a gross financial debt of $ 28.6 billion and a net financial debt of $ 26.7 billion, most of which was accumulated in the acquisition of Actois Genix in August 2016 for $ 39 billion. Teva's net financial debt to EBITDA reached 5.45 at the end of March 2019. In Teva's conference call with analysts after the release of the first quarter financial statements of 2019, Teva CEO kare Schultz admitted that the debt ratio may be delayed .
Teva's share fell in recent weeks to a level that we didn't see over 20 years. the stock fell at the New York stock exchange to 8.6$.
Market sources attribute the decline to the compromise agreement that the company signed at the end of last week in the US painkiller suit, which is likely to complicate Teva's financial situation further down the road.Ubs investment bank UBS lowered the recommendation to Teva because the Bank's economists estimate that Teva More painful compromises are expected in the face of claims by 44 countries in the United States to adjust prices of drugs, in which Teva appears to be a major player and will have to pay more than $ 4 billion in fines and compensation. Teva will pay 85 million dollars without saying that it has confessed to the allegations Z against it.The first legal procedure in a series of procedures for the marketing of opioid painkillers that caused addictions is now ending for Teva. The Israeli pharmaceutical company has reached an agreement with the State of Oklahoma, according to which Teva will pay a one-time payment of $ 85 million, which will be transferred to the state. The arrangement does not determine any wrongdoing on the part of the company. Teva emphasizes that it has not contributed to the abuse of opioids in Oklahoma in any way.
It is estimated that the Oklahoma process will serve as a prelude to the rest of the proceedings in this matter, which are expected in the near future. Analysts were unable to estimate the extent of Teva's exposure to opioid claims; Teva, for its part, said it would not compromise because it had no money, but would defend itself with all force. However, it appears that in cost-benefit calculations, and in light of its unflattering financial situation, the Company preferred to compromise in the first proceeding. "The company has arranged the matter in a way that benefits people who have suffered from opioid abuse and helps to stop the effects of the opioid crisis." Teva continues to prioritize maintaining the company's long-term stability, the company said.
"While the company has said all along that the court is not the place to resolve this crisis, Teva is happy to place the case in Oklahoma behind it and is ready to defend itself resolutely against other claims, including the pending trial in the Cleveland Federal Court, Pending. "
The claims on opioids have weighed on Teva in recent months, and have been joined by another demand by the US authorities for price fixing of generic drugs. "This is definitely a real crisis in the US, but Teva has been active in opioids, "As a generic supplier, we have not promoted sales of such drugs," said Teva's Chief Financial Officer, Michael McClellan, recently.
Oppenheimer analyst Assaf Handeli said in response that a compromise of $ 85 million and similar future compromises reflect a minor slowdown in the process of reducing Teva's leverage.
Investment bank HSBC lowered its target price for Teva under the price adjustment affair, assuming that Teva would have to pay $ 3 billion in cash in the affair.
This is a preliminary market assessment of legal proceedings that increased last weekend as 44 US states filed a lawsuit against 20 companies in the US generic market, headed by Teva, on suspicion of price fixing. Teva's share is more than 80% off the peak of 2015. The bank's investment analyst, Steve McGarry, lowered its target price to $ 10 per share, compared with the previous target price of $ 13. This is lower than the market price of the share.
"Teva, which is currently facing litigation in the United States about the marketing of opioid drugs in an apparently inappropriate way, the new litigation, which is more broadly based on generic drug pricing, clearly increases the risk profile. Another risk to Teva is that any litigation about the pricing of generic drugs or opioid-related marketing are high-profile issues, and court cases may generate persistent negative headlines. "" The main impact on Teva will be in 2019 and 2020, and although the group is expected to achieve The goals of its cost savings, it will be difficult to generate growth. We estimate that a $ 3 billion figure is reasonable, but as with many legal cases in the field of pharma, the margin could be from zero to two billion dollars, "said McGarry.
Teva has to deal with a case at its center that could cost it billions of dollars. More than 40 US states filed a lawsuit against generic drug manufacturers claiming a large-scale conspiracy, claiming that the Israeli company significantly raised the price of 112 generic drugs and coordinated the price of at least 86 drugs with its competitors. More than 1,000%, according to the lawsuit: "Teva has regularly taken part in the conspiracies."
Bloomberg news agency reported that more than a dozen past and present executives of leading generic companies, including Meilan and Pfizer, were sued on Friday. The lawsuit was filed by Connecticut Attorney General William Tong.
"We have solid evidence that generic drug companies have plotted billions of dollars in fraud against the American people," Tong said in a statement yesterday. "We all wonder why our health insurance, especially prescription drugs, is so expensive in this country - and that's the main reason." The lawsuit accuses manufacturers of inflating prices of more than 100 types of drugs, marking a significant expansion in relation to the complaint filed in 2016.
In addition to the plaintiffs' countries, the Anti-Trust Division of the Ministry of Justice also opened a criminal investigation. The head of the division said last week that charges would be filed, but did not say when.
The plaintiffs claim that the companies conspired to coordinate prices in order to raise prices and thus avoid competition. Senior officials, who used meals, parties and golf games to coordinate, also made direct phone calls, according to the prosecution. It mentions the names of specific divisions in the pharmaceutical companies, such as Novartis' Teva and Sandbus.
The senior executives whose names are mentioned in the lawsuit with Maureen Cabano, former senior vice president of nature who currently works for Lant, are: James Nesta, Vice President of Sales and Sales, and David Carnitiller, former Teva vice president of sales at Apotex. Meilan's president, Rajiv Malik, is mentioned in another lawsuit filed in 2017. This claim is still underway.
Representatives from the companies did not respond, as did the senior officials mentioned in the lawsuit.
About six months ago Teva was one of 16 generic drug manufacturers suspected of creating a cartel to determine prices. "This is probably the biggest cartel in US history," said Joseph Nielsen, assistant attorney general in Connecticut. In the documents submitted to the court, Teva argued that allegations of conspiring to set prices "are completely speculative and based on no facts."
The investigation revealed that senior company executives had created a code language to describe their conduct. For example, the "sandbox" referred to the market for generic prescription drugs. A "fair share" talked about the distribution of the sales pie so that each company enjoyed continuous profits, while "dirty the market" meant that one company ignored the unwritten rules and sold the drugs at a lower price than agreed. The officials were so friendly that they set up an alphabetical round to decide who paid the bill for the meals.
Teva is in the center of the conspiracy, after 19 months from 2013 to 2015, it significantly increased
A suspicious nature that raised the price of 112 generic drugs and matched the prices of at least 86 drugs with its competitors. In some cases, prices are raised by more than 1,000%. "Teva has regularly taken part in the conspiracies described in the lawsuit, and its conduct is extensive and spreads across the industry," the lawsuit states.