The share price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) fell another 2.2% yesterday on Wall Street, reaching its lowest level in 19 years, while the share price of Mylan, its generic pharmaceuticals rival, has been rising in recent days. As a result, Mylan has overtaken Teva in market cap. As of the close of yesterday's trading on Wall Street, Teva's market cap was $8.9 billion ($8.18 per share, 88% below the share's peak in July 2015, while Mylan's market cap was $9.3 billion, $385 million higher.
Mylan has reason to be satisfied with its achievement, which makes it the world's leading generic drug company in terms of market cap (Sandoz, another large generic drug company, is listed on the stock exchange as part of Novartis). From a broader perspective, however, Mylan's market cap is also nothing to be proud about. When Teva attempted a hostile takeover of Mylan four years ago, Mylan's value in the deal was assessed at $40 billion, while its market cap at the time was over $30 billion. Teva's market cap was then $55 billion, meaning that the two companies' investors have lost many billions in value in the years since then.
As part of its hostile takeover attempt, Teva bought shares in Mylan on the open market at prices around $70 a share, compared with Mylan's current $18.10 share price (Teva spent over $1.5 billion on Mylan shares at the time, and later sold them at a loss). Mylan chairperson Robert Coury, who opposed his company's acquisition by Teva, published malicious letters to then-Teva CEO Erez Vigodman at the time. In one letter, Coury wrote, "(We) do not wish to make Teva’s problems Mylan’s problems" and "Teva has faced a constantly changing and flip-flopping strategy, rotating leadership, shareholder outrage… Bringing Teva’s 'dysfunctional' culture to the region could disrupt the core of our business." Coury added, "We also have serious concerns about Teva’s ability to integrate and efficiently run a combined company, and deliver meaningful shareholder value."
Teva abandoned the attempt to acquire Mylan, and in the summer of 2015 announced its acquisition of Actavis, the generics division of Allergan, for nearly $40 billion. In order to finance the acquisition, Teva raised debt, which later put a burden on its balance sheet and made it necessary to implement an immediate program of major cutbacks. During the attempted takeover of Mylan and the acquisition of Actavis, Teva's management was almost completely replaced. Under the management of current CEO Kare Schultz, Teva laid off 10,000 employees and sold various activities in order to service its debt, and managed to slightly reduce its leverage.
At the same time, in recent weeks, concern grew in the market that Teva would have to pay billions of dollars to settle legal proceedings against it involving both price fixing in the generic drug industry and the marketing of opioid pain relievers that cause addiction. These costs will have a negative impact on the lowering of Teva's leverage and make it difficult for the company to service its debt. The result was a 43% plunge in Teva's share price in recent weeks.
For its part, Mylan, which stated during Teva's attempted takeover that it would not consider any offer below $100 per share, is also far below the peak it reached at that time. Last month, its share plummeted 24% in a single day after the company published weak reports and fell short of the analysts' forecasts (not for the first time), among other things because of the slide in generic drug prices in recent years.
Published by Globes, Israel business news - en.globes.co.il - on June 20, 2019
© Copyright of Globes Publisher Itonut (1983) Ltd. 2019