I have been bearish on Teva (NYSE:TEVA) since Q3 2017. Like Allergan (AGN) and Bausch Health (BHC) the company made acquisitions at market heights. Its $40 billion acquisition of Allergan’s generics business eventually came back to haunt the company. The rationale behind the deal was that management wanted to offset a pending loss of exclusivity (“LOE”) for Copaxone, its blockbuster multiple sclerosis drug.

By Q3 2017 its debt load was approaching 5x EBITDA – junk levels. Teva engaged in asset sales in order to pare debt, but it was much ado about nothing:

The embattled Israeli drugmaker said it had struck a pact with CooperSurgical to unload its Paragard intrauterine copper contraceptive for $1.1 billion in cash. Along with it will go a manufacturing facility that produces the product exclusively …

Paragard generated revenues of about $168 million between June 30, 2016, and June 30, 2017, Teva said – but the company is much more in need of the cash. Thanks to last year’s ill-fated, $40.5 billion purchase of Allergan’s generics unit, Teva expressed doubts earlier this year about meeting its debt agreements.

In October 2017 the FDA approved Mylan’s (MYL) generic Copaxone and Teva cratered. The company’s credit rating was lowered to junk status and the rest appeared to be history.

Along Comes Warren Buffett And Berkshire Hathaway

The company’s Q4 2017 results were nothing short of disastrous. Core Generic revenue fell 16% Y/Y, while Copaxone fell 19%. Teva’s EBITDA margins fell a few hundred basis points versus the year earlier period. Warren Buffett will likely bail on Teva … assuming he hasn’t already. Read more:

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