As part of Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) sale of assets aimed at servicing the company's large debt, the company has sold most of its holdings in Australian company Mesoblast, "The Australian" daily newspaper reports. The newspaper wrote that Teva had sold 29 million shares at A$1.50 (1.50 Australian dollars) per share, making its total proceeds from the deal A$43.5 million ($33.6 million) and reducing its stake in Mesoblast to less than 5%.
Today's trading turnover in Mesoblast's shares was exceptional, with the share price dropping 11%. Mesoblast, which is also listed on Nasdaq, has a $592 million market cap.
No official announcement has been issued yet about Teva's holdings in Mesoblast. The measure is not a surprise, however, given Teva's declared intention of selling assets that are not part of its core business, and because Teva abandoned its partnership with Mesoblast over a year ago.
Mesoblast develops products based on stem cells for treatment of various medical syndromes. Teva acquired its stake in the company and a cooperation agreement with it when it acquired Cephalon in 2011. Cephalon and Mesoblast had a development and commercialization agreement, for which Cephalon paid $130 million. The partnership involved a product named CEP-41750, which was then in a Phase III clinical trial as treatment for chronic heart failure, and Teva returned the rights to Mesoblast. In 2015, even before it abandoned this cooperation, Teva recognized a $171 million write-down on its investment in Mesoblast. In the second quarter of 2016, following the discontinuation of cooperation between the two companies, Teva recognized a $258 million write-down, which was the value of the drug in development previously recognized in Teva's books. In retrospect, Mesoblast was another unsuccessful asset acquired by Teva as part of its disappointing acquisition of Cephalon.
Mesoblast was also the focus of a highly publicized lawsuit against Teva, when Gal Hirsch (who was selected for Israel Police commissioner and withdrew his candidacy), claimed that he was entitled to mediation fees from Teva for presenting the Australian company to then-Teva CEO Shlomo Yanai. Hirsch demanded NIS 19 million from Teva, alleging that the acquisition stemmed from this introduction, but withdrew his suit two years ago.
Still in danger of a down-grade
Teva recently sold its portfolio of special women's health products in two deals for a total of $2.48 billion. The sale was part of the company's efforts to comply with the covenants for its debt. As of the end of the second quarter, Teva's debt totaled $35.1 billion, after the company completed its acquisition of Actavis from Allergan for almost $40 billion. The rating agencies downgraded their rating for Teva's debt to one level above junk bonds. Teva later reached agreement with the lending banks on an increase in the leverage ratio required from it (for $10.9 billion of the debt), but concern about an additional downgrade still exists as a result of the negative impact of the launching by Mylan N.V. (Nasdaq: MYL; TASE: MYL) of generic competition for Copaxone on Teva's cash flow.
Teva's market cap on Nasdaq and the Tel Aviv Stock Exchange (TASE) is $14.5 billion, following a 54% plunge in its share price to $14.30 since early August.
Published by Globes [online], Israel Business News - www.globes-online.com - on October 25, 2017
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