Teva Pharmaceutical (TEVA)

Took on a lot of debt to enter the specialty pharma area and stumbled. Suffered a sell-off. But have recently righted the ship, replaced the CEO and announced major cost-cutting. Enjoyed a big rebound, but says be very cautious.

They are having competition with their biggest product. Mylan (MYL-Q) has come out with a generic alternative to their Copaxone. Their debt has been heavily laden. Just let 10,000-15,000 Israeli employees go. You have to be in a gambling phase, because this could go to zero with their heavy outstanding debt load. They don't have a lot of new products coming out. Instead of playing the stock, he is looking at their bonds.

A pharmaceutical that does generics as well as branded drugs. The stock has not done well. Has new management, which are cutting costs. Also cut their dividend. There isn’t a lot of visibility on the pipeline, because one of their key branded drugs is seeing more competition and is going generic soon.

This is one he picked many years ago, and it only had one good year. They bought assets from Allergan, and it just went down the toilet. Although it has recovered significantly, turnarounds are hard. He sold his holdings in early 2017, and is not looking at this until it becomes another force again.

Don’t go near it. They are looking at mid-20% losses this and next year then flat earnings after that.

The largest generic drug manufacturer. The FDA and other global drug regulators and governments are so focused on driving down the costs of healthcare, including drugs, there is pressure on the entire generics sector. The company has had many other issues as well.

This has fallen a long way. What you have to think about is, should you take a tax loss. If you haven’t done it yet, it might be worthwhile. You can also buy it back after 30 days and you will have crystallized your loss.

Doesn’t see any Buy signal yet. It looks like it will continue going lower. Let buyers emerge first, before buying this. He would avoid for now.

(A Top Pick Dec 28/16. Down 61%.) He got out of this 2 months later at about $32, so was down about 10%. Shortly after he bought this, the CEO left for undisclosed reasons, and he took that as a giant warning sign, so he ran away that same day.

He has not been in it for a long time. It is a very competitive space and a few drugs were up against competition. He has not got excited about it and has not invested in it.

Politicians love to hate drug stocks, because they are the most obvious part of the healthcare system and they can badmouth them. As a generic manufacturer, the only cost they have is the pill, and they can drive down the price. As governments globally tried to encourage generic pharmaceuticals, to take pricing pressure off, there was a lot of government support for them. Now that most of the major drug companies have been genericized, they are squeezing them as well. This company consolidated and took on a lot of debt, and are still being squeezed. 7.5% dividend yield.

Sell or hold? A global generic company based in Israel. They've had a couple of CEO's they've gone through. The stock has fallen a lot. A new CEO is coming in, who had really turned around another company. Expects the 8.4% dividend will be cut even more. The generic business has been a lot tougher over the last while. The place to buy this is after they've cut the dividend. It's going to be much more volatile over the next little while.

Sell? This has been a disaster. If considering dumping, is this in a taxable account and do you need losses? If you are a long-term investor, this is a really good stock. Ask yourself, “If I didn’t own this, would I buy it today?”. He believes in the long-term thesis of this company, growth in generics. They control about 20% of the global generics drug market. As the global population grows and people get older, are countries like China and others going to care for their citizens? They are going to need generic drugs, because they are going to be significantly cheaper.

Stayed away from this because of the balance sheet. They ran into issues with their covenants. On the debt side they borrowed a significant amount of money to buy Octavis’ generic business. The income was less than expected because of deterioration in the pricing of generic drugs. About half the company’s operating profit was coming from Copaxone for MS, and the competition was able to invalidate the patent on the 3X a week dosage, and was able to take some share.

Had a really tough go. They’ve been good operators but made some acquisitions where some of the products got price squeezes. Also Mylan (MYL-Q) recently put out a drug for multiple sclerosis which got approved. It is a generic version of Teva’s non-generic version. There’s too much risk.