Teva bulls believe the restructuring, combined with new drug launches will be enough to right the ship. Teva recently launched generic Syprine at $18,375 per bottle, just 13% below the price of Valeant’s branded drug:

In promoting its “lower-cost” alternative to Syprine, a Teva executive boasted in a news release that the product “illustrates Teva’s commitment to serving patient populations in need.”

What the release didn’t mention was the price: Teva’s new generic will cost $18,375 for a bottle of 100 pills, according to Elsevier’s Gold Standard Drug Database. That’s 28 times what Syprine cost in 2010, and hardly the discount many patients were waiting for.

Patients may have seen the exorbitant generic price from Teva as more price-gouging; however, I saw desperation. Teva likely relied on high margins from Copaxone for too long. Its $40 billion acquisition of Allergan’s (AGN) generic drug operations left the company highly-indebted at a time when generic prices in North America are eroding. Teva’s debt/EBITDA exceeds 5x. In my opinion its $49 billion enterprise value does not reflect its poor business prospects. It practically has to increase prices to service debt and justify its inflated share price.

Conclusion

Both Valeant and Teva are highly-indebted and facing LOE for key drugs. Raising drug prices could be their best option to service debt from acquisitions at market heights. Having to explain this to lawmakers and the public could create negative sentiment for both stocks. Sell VRX and Teva.

 

Video On Demand: Valeant’s Insolvency Explained

Wednesday April 4th the Shock Exchange held a live stream event where he explained Valeant’s insolvency. The event was oversubscribed with thousands of investors and lawmakers tuning in. It was also very detailed and informative. The Shock Exchange walked investors through Valeant’s change in strategy from a pharma roll-up to becoming a traditional drug company and how that led to its insolvency. The video is available below:

 

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