Teva's losses wipe over NIS 10b off Israeli funds

Teva Photo: Tamar Matsafi
Teva Photo: Tamar Matsafi

The Israeli public is paying the price for Teva's disastrous performance through pension fund and mutual fund losses.

For years, Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) share was considered the "people's share." Every Israeli holds it, at least indirectly through his pension savings. Today also, as one of the leading companies on the Tel Aviv Stock Exchange (TASE), Teva's share is included in the investment portfolios of virtually all Israeli financial institutions. According to figures on the website, Israeli investment institutions hold 5.5% of Teva's shares, nearly 5% of which is through long-term savings instruments, and the rest through mutual funds. The figures for holdings for managers of long-term savings are correct as of the end of June, and the holdings for the mutual funds are correct as of the end of August, so there may have been some changes in the holdings of particular financial institutions.

If we assume, however, that investment institutions in Israel have been holding 5-6% of Teva's share capital in recent years, it can be estimated that those institutions have lost $3 billion (over NIS 10 billion) on paper since Teva's share price reached its peak in July 2015, as of the end of last week. This is actually a bigger loss in value than all the debt write-offs by local tycoons in recent years put together. Last week's dive following the publication of Teva's third quarter financial reports reached $147 million.

The biggest victim of the drop in the Teva share is pharma company Allergan, which has held 9.9% of Teva's shares - a holding that it is planning to sell. When Allergan received the shares as part of the deal in which it sold Actavis to Teva in 2016, these shares were worth $5.3 billion. Their current value is only $1.14 billion.

Incidentally, the employment terms of new Teva CEO Kare Schultz include, among other things, three packets of blocked shares amounting to a total of $20 million granted to him on the basis of the $15.50 share price before the report of his appointment. These are currently far out of the money; Teva's share price is now 26.5% below that price. The Teva share price plummeted 20% on Wall Street last Thursday to a low point it has not been at since the beginning of the century. It recovered slightly on Friday with a 1.5% gain, reaching $11.40, reflecting an $11.6 billion market cap, almost $50 billion less than its peak value in July 2015.

Has the share price bottomed out, or will it continue falling to below $10? Some analysts are already predicting a single-digit price, such as Morgan Stanley, whose target price for the share its $7. According to Reuters, 18 analysts are recommending "Neutral" for Teva's share, four give positive recommendations, and three negative recommendations.

"In what has become a frustrating ritual recently, Teva again lowered its guidance, predicting continue pressure in generics business and having been caught unready when Mylan received marketing approval for generic Copaxone," writes Barclays analyst Douglas Tsao, who lowered his target price for the share from $19 to $13. At the same time, he provides two scenarios for the share. In the event of an upside that includes achievements in ethical drugs and obtaining approval for important generic drugs, the target price is likely to reach $18. In the event of a downside, in which price pressures in generics mount and integration of the Actavis acquisition encounters problems, the target price is only $5.

Published by Globes [online], Israel Business News - - on November 5, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Teva Photo: Tamar Matsafi
Teva Photo: Tamar Matsafi
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