Teva gets a boost as billionaire Buffett reports $358M stake

Teva
Teva is in the process of implementing a $3 billion cost-cutting plan. (Image: Teva)

Teva may be decimating its employee ranks and struggling under a mountain of debt, but Warren Buffett apparently likes what he sees happening at the Israeli drugmaker.

Wednesday, the billionaire’s company, Berkshire Hathaway, reported that it had snapped up 18.9 million American depositary receipts of Teva, worth close to $358 million. Even though the investment paled in comparison to the billions of dollars that Berkshire Hathaway invested in companies like Apple and American Express, the news sent Teva shares soaring, and they rode the high into Thursday morning.

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The investment in the world’s largest generic drugmaker follows just a couple of weeks after Berkshire Hathaway teamed up with Amazon and J.P. Morgan to form an independent healthcare company Buffett said would “check the rise in health costs.”

“The ballooning costs of healthcare act as a hungry tapeworm on the American economy,” he said in a statement.

If Buffett is impressed by the turnaround plan rolled out by new Teva CEO Kåre Schultz, he’s not the only one. Credit Suisse analyst Vamil Divan recently upgraded Teva’s shares, highlighting “early signs of execution” on the company’s $3 billion restructuring plan that’s set to claim 14,000 jobs.

“We expect the focus on healthcare spending and, in particular, increased drug spending, to lead to greater utilization of generic drugs both in the U.S. and outside of the U.S., and this is something that should ultimately be a positive for Teva and other large generic manufacturers,” Divan wrote to clients.

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It hadn’t been a great week for Teva before Wednesday. Tuesday, Novartis’ Sandoz revealed that the FDA had approved its generic to Teva’s biggest cash cow, long-acting Copaxone. Teva also filed its annual 10-K filing, which included language that was “less sanguine” than some industry watchers expected, Barclay’s analyst Doug Tsao wrote in a note to his own clients.

In it, the company said it was no longer certain its generics business could return to growth in 2020, and it also noted that there would be fewer opportunities to raise prices going forward.