Shares of Teva Pharmaceuticals (NYSE: TEVA) fell to a new low this month as markets across the world continued to be battered by the raging covid-19 pandemic, at a time when the company is undergoing an extensive restructuring.
The Israel-based generic drug maker is a more organized entity now, after a slew of cost-reduction measures and downsizing. Though the stock has the potential to appreciate in the long-term, after the recent pullback, the macroeconomic uncertainties call for caution as far as investing in Teva is concerned.
But, there is no doubt many investors would find the stock attractive at the current lows and consider it as a buying opportunity. Once completed, the ongoing reorganization should position the company to take advantage of the general improvement in the generic drug market.
However, it is not sure the revamp would help Teva tide over the slowdown that started a few years ago when Novartis (NVS) launched a generic version of its blockbuster multiple sclerosis drug Copaxone. Also, Teva suffered a setback last year after it was named in lawsuits filed against pharmaceuticals companies, alleging price-fixing opioid misuse. The cases, which at one point pushed Teva to the brink of bankruptcy, are at different stages of settlement.
The company is currently betting on its revamped product portfolio to drive growth, which includes Huntington’s disease drug Austedo and migraine pill Ajovy. It is expected that an increase in market share for the new products would offset the impact of the slowdown in the sales of Copaxone in North America. TRUXIMA, Teva’s first biosimilar in North America, is another potential revenue driver.
Nevertheless, the management needs to devise strategies for international markets, including Europe and Japan, where it has been witnessing a slowdown due to loss of exclusivity for certain oncology drugs. The launch of Ajovy in Europe last year was a major step towards strengthening sales in that region.
In the fourth quarter, adjusted earnings increased in double digits to $0.62 per share aided by a decline in expenses and a modest rise in revenues. The results benefitted from a one-time tax benefit and exceeded the estimates.
The recovery of the stock early this year was short-lived, after a losing spree, as it pulled back last month and traded close to the multi-year lows seen in early 2019. The value nearly halved in the past twelve months and dropped 22% since the beginning of the year.
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