Teva (TEVA) has been rather busy the past few weeks. The company hired new CEO, Kare Schultz, which removed a level of uncertainty. It also engaged in assets sales to help pare its $35 billion debt load. However, it could be too little to late. Wednesday the FDA approved Mylan’s (MYL) generic version of Copaxone, Teva’s top-selling multiple sclerosis drug. Copaxone represents about 18% of revenue; with pretax profit margins of around 81% it also commands 45% – 50% of the company’s EBITDA.
I previously estimated Copaxone revenue could fall by 70% on generic competition:
Copaxone revenue could fall by 51% just on price reductions alone. Wells Fargo (WFC) analyst David Maris assumes Mylan discounts Teva’s pricing by 40% in the 40 mg dosage market, and captures 40% market share. A 51% decline in price and a 40% decline in volume would equate to a revenue decline of approximately 70%.
When it rains it pours to Teva. Shocking The Street, a premium investment research group in conjunction with Seeking Alpha, believes a ratings downgrade from Moody’s or S&P could be imminent. It is not a matter of if, but when. A hit to Copaxone will likely cause a major hit to Teva’s revenue and EBITDA. The rating agencies will have no choice but to act. Read more:
Shocking The Street Followed By Morgan Stanley
Shocking The Street continues to give investors, original, timely, hard-hitting research. During the period of uncertainty who would you rather have on your team, a publicist or someone willing to tell you the truth? Morgan Stanley recent co-signed Shocking The Street in its downgrade of Allergan:
After the Shock Exchange highlighted Allergan’s dependence upon Restasis and queried the next rating downgrade Wall Street had to act. Earlier this week Morgan Stanley analyst David Risinger downgraded Allergan from “Overweight” to “Equal-Weight.” In doing so he co-signed the Shock Exchange verbatim:
Specialty drug maker Allergan (AGN) raised more than a few eyebrows this month when news broke of the deal it made with the Saint Regis Mohawk Tribe of upstate New York to protect patents for one of its blockbuster drugs.
In fact, one of Wall Street biggest drug analysts cited the deal as one of three reasons it has downgraded Allergan’s stock and slashed its price target.
Allergan decided earlier this month to transfer ownership of the patents protecting the dry eye treatment Restasis, Allergan’s second biggest selling drug, to the tribe to prevent the scrutiny of the U.S. Patent & Trademark Office. The tribe, which will get paid $15 million annually, looks to use tribal sovereign immunity to prevent the patent challenge.
It is a creative maneuver. It is also untested, says David Risinger, an analyst with Morgan Stanley who argues that Allergan’s efforts to sidestep IPR action could mean more patent risk for Restasis.
Shocking The Street is the firm Morgan Stanley turns to for its own research. They conveniently renege to cite the source though. Investors should expect a sell rating on Teva and a “conviction buy” on RegeneRx (RGRX) from Morgan Stanley any day now.
On Shock Exchange
Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead explains the stock market and U.S. economy through the eyes of the New York Shock Exchange, a financial literacy program Ralph Baker started in 2006 to share his passion for investing and basketball with his 11-year-old son and other boys his age. The book predicts the “pain ahead” for the U.S. economy, the demise of China, the pending stock market crash and social unrest.
Shock Exchange has been trumpeted by President Obama, the Senate Finance Committee and House Ways and Means Committee. However, they conveniently forgot to cite the source. Critics try to make and unmake authors, but the market always decides. The book was also recently added to Trump Syllabus K12, crafted by Dr. Kaye Wise Whitehead of Loyola University Maryland. Shock Exchange is the best book on Wall Street in the past 20 years, and on economics, it may be the most important book since the Great Depression.
On Trump And The Global Economy
We had our second installment of Trump And The Global Economy town hall in October. Professor Lance Brofman, Coconut Rob, Wuyi Jacobs (AfroBeats Radio) and Shock Exchange, author of Shock Exchange: How Inner-City Kids From Brooklyn Predicted the Great Recession and the Pain Ahead chopped it up with hundreds of members of the Brooklyn community. The town hall is designed to give the public real information about Trump’s policies on taxes, immigration, the economy, the stock market, etc. and how they will impact the country and the community.
You guessed it, drug makers like Valeant, Celgene, Mallinckrodt, Insys, Depomed, and Allergan were the topic. We explained everything from these companies’ price-gouging to tax avoidance to insolvency to contributing to the opioid epidemic.