Teva got a nice shot in the arm after reports that billionaire investor Warren Buffett took a stake in the company.
Teva Pharmaceutical Industries got a nice shot in the arm after reports that billionaire investor Warren Buffett took a stake in the company. Shares of Teva were up nearly 10 percent in premarket trading following the news. Once the markets opened this morning, shares continued to jump more than 10 percent. As of 9:39 a.m., shares of Teva are trading at $21.46. That price is still well below the $36.77 per share the stock was trading at on Feb. 15, 2017.
On Wednesday, Buffett’s Berkshire Hathaway took a $358 million stake in the Israel-based company, CNBC reported. Citing a quarterly filing from Hathaway, CNBC said the company snapped up 18.9 million shares of Teva.
The investment comes at a time when Teva is grappling with $30 billion in debt and undergoing a massive restructuring that includes laying off approximately 14,000 jobs, about 25 percent of its global workforce. The cuts are expected to save the company about $3 billion. The majority of the job cuts will occur overseas but some have hit the shores of the United States. Last week, BioSpace reported Teva cut 46 positions at a New Jersey facility. Those cuts followed news the company slashed 208 employees in neighboring Pennsylvania in January.
While the Berkshire Hathaway filing did not indicate why it took the stake in Teva, some analysts believe Buffett is supportive of the moves being made by Chief Executive Officer Kåre Schultz are the right ones. Fortune reported that Citigroup Inc. analyst Liav Abraham sent a note to clients informing them of that idea. Abraham said it appears Buffett and Hathaway believe Teva is “taking the right steps to execute on a successful turnaround,” Fortune reported.
Writing in Bloomberg, Tara LaChapelle, a gadfly columnist covering Berkshire Hathaway, suggested that Buffett’s investment was bad news for those looking to short Teva stock.
“… Buffett’s sheer presence may be enough to send Teva short-sellers packing,” LaChapelle wrote.
The backing of Buffett and Berkshire Hathaway will certainly be welcome news for Teva as it has a bleak outlook for 2018 that includes a further erosion of sales through 2018. That loss could result in a decline of about 18 percent to $18.3 billion. That’s about $1 billion less than analysts had initially forecast for 2018.
Teva is working to reduce its debt load though. The company is in the midst of divesting itself of non-core assets. At the beginning of February, Teva said it completed the sale of a portfolio of products within its global women’s health business for $703 million in cash. The portfolio spans areas that include contraception, fertility, menopause and osteoporosis. In 2017, Teva sold its branded contraceptive line Paragard, a product within its global Women’s Health business, to CooperSurgical for $1.1 billion.
