Teva Pharmaceutical (TEVA, Financial), the Israeli drug company, dropped materially during the quarter. The company faced a perfect storm of industry pressures and self-inflicted missteps. Pricing pressure in the U.S. generics market was worse than normal. The resultant lower cash flow, and a high debt load from the Allergan acquisition, forced the company to cut its dividend and warn that debt covenants may be violated. Management planned asset sales to help alleviate cash requirements. Generic drug competition also impacted Allergan, as the stock declined nearly 15% on concerns of a 2018 generic alternative to Allergan’s flagship Alzheimer’s drug, Namenda. However, Allergan’s current drug portfolio remains resilient, led by advances in Botox and the introduction of Namzaric. Company management also signaled its intention to add new medicines and expand via acquisitions.
From Bernard Horn (Trades, Portfolio)'s third quarter 2017 shareholder commentary.
