Teva Pharmaceutical Industries ($TEVA) has no CEO. Its stock price stinks, and in 6 months it could face generic competition for the drug that generates 20% of its revenues. It may be time for something dramatic, like a multibillion-dollar tie-up with another drugmaker that can save it from itself--a company like Actavis ($ACT) or Mylan ($MYL).
"People are looking for the company to do something," Herman Saftlas, a New York-based equity analyst at Standard & Poor's, tells Bloomberg. "It's going to take more than just business as usual to right-size this ship and get it back into growth mode. Teva probably realizes now that a little more drastic steps have to be taken. It is possible that they could unveil a deal with somebody."
CEO Jeremy Levin resigned last month in a reported fight with Chairman Phillip Frost over Levin's plan to cut $2 billion in costs by whacking jobs, including in the home country of Israel. The company insisted it would move forward with Levin's plan of consolidating manufacturing and getting tight control over supply procurement and its supply chain. CFO Eyal Desheh is steering the ship for now while the board sorts out its options.
But time is running short. A court ruling has put its multiple sclerosis drug Copaxone, which generated $4 billion of its $20 billion in sales last year, vulnerable to generic competition in May. That is about 18 months ahead of what Teva had expected. Its stock price has fallen to its lowest price-to-sales ratio ever, Bloomberg figures, and that may make Teva vulnerable to an activist shareholder and potentially a takeover offer. While its market cap of about $44 billion would make it a stretch for a buyout, it might do a merger of equals with someone like Mylan, Valeant ($VRX) or Actavis, suggests Ronny Gal, a New York-based analyst at Bernstein.
Other analysts think that maybe Teva could pull off a deal or two for some late-stage drug candidates that could help it overcome the Copaxone issues. With potential winners in its own pipeline, that might give it enough revenue to get back on its feet.
Still, with its "incredibly weak" stock price, Adam Strauss, co-manager of the $300 million Appleseed Fund, tells Bloomberg some companies may very well be sizing it up for an offer. "I'm sure that other companies are probably looking at Teva and thinking this might be a good company to consider acquiring," said Strauss, whose fund owns Teva shares.
- read the Bloomberg story
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