Exactly one year ago, Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) share price surged after it was learned that Berkshire Hathway, controlled by legendary investor Warren Buffett, had become a shareholder in the drug company. Although Buffett told CNBC two weeks later that he had not been involved in the investment, it was reported in the following quarter that Buffett's company had doubled its investment in Teva, and the share price shot up again.
Berkshire Hathaway slightly increased its holdings in Teva in the second quarter of 2018, but two quarters have passed since, and the fund's holdings have not changed. Late last week, a quarterly report about Berkshire Hathaway's holdings in listed companies was sent to the US Securities and Exchange Commission (SEC) showing that the fund still holds 43.2 million shares in Teva with a current value of $778 million. Berkshire Hathaway lost $265 million on paper on its holding in Teva during the fourth quarter of 2018.
In general, it appears that Berkshire Hathaway has profited on paper on its investment in Teva shares, although its profit is fairly small. The fund is not obligated to report at what prices it bought the shares it holds, but if the average Teva share price in each quarter in which Berkshire Hathaway bought shares in Teva is used, a total investment of $760 million is obtained, $18 million less than the shares' current value.
At the same time, holdings in Teva by two other investment concerns were reported last week. Capital Research, the largest shareholder in Teva with a 14.9% stake, sold some of its shares in recent months, reducing its holding to 12%, with a current value of $2.2 billion. A new party at interest in Teva is EuroPacific Growth Fund, a US fund that makes long-term investments in shares. At the end of 2018, EuroPacific's holding in Teva was 5.1%.
Moody's retains its junk bond rating for Teva
More news concerning Teva came last week from the Moody's rating agency, which rates Teva's debt (which totaled $28.9 billion as of the end of 2018). Moody's economists stated that they had conducted a period examination of Teva's debt, and that they had not changed their Ba2 rating - a junk bond rating.
"The rating reflects the significant size of Teva in the both the generics market and the original drugs market, plus its status as the world's largest generics company," Moody's economists write. "The debt repayment and the efforts to cut costs are helping to stabilize the business, while the company faces continued erosion of its profits due to competition with Copaxone by generic versions of the drug in the US. Moody's believes that Teva's leverage will reach a peak of 5.6 (ratio of debt to EBITDA) in 2019, before falling gradually to 4.5 in 2020."
Moody's states that there is a risk that Teva will have to spend unforeseen sums in the coming years on prolonged legal proceedings, including on matters pertaining to opioid products.
Published by Globes, Israel business news - en.globes.co.il - on February 17, 2019
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