Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) has been dealing with a lot challenges over the past 12-18 months.
It has been trying to incorporate its massive acquisition of generic drug maker Actavis for the better part of a year, which has included selling off both promising pipeline products as well as money-making drugs, in an effort to get approval in the U.S. and Europe.
This has weighed heavily on TEVA, but it wasn’t the only wrinkle on its journey. Its key name brand multiple sclerosis drug, Copaxone, is coming off patent soon and TEVA is trying to keep its patent out of the hands of generic drug makers for as long as possible.
The company also settled a corruption case with the SEC in Q4, a deal that cost it $500 million dollars.
Add to that, the CEO just recently stepped down, right before earnings were released.
Things Have Been Rough for the Entire Industry
Needless to say, the markets have not been impressed with the past handful of quarters for TEVA. And none of this takes into account the seemingly perpetual state of flux within the U.S. healthcare system. It’s hard to figure out if any pharmaceutical companies have an advantage at this point.
All this has weighed heavily on TEVA stock, which is why shares are down more than 38% in the past 12 months.
But, there is good news, and it’s already started. Q4 numbers were released on Monday and they were better than expected, the whole way around. Earnings beat. Revenue beat. And, guidance has been maintained for 2017.
What’s more, generics revenue was up 44% for the quarter, which shows that the Actavis acquisition is finally adding value to TEVA.
TEVA also announced that it has two new asthma drugs on the market that will be direct competitors to GlaxoSmithKline plc (ADR)’s (NYSE:GSK) Advair. According to Fierce Biotech, Advair is a blockbuster, bringing in more than $2.3 billion in sales for 2016. There will be plenty of room for competition, and that means plenty of opportunity for TEVA. This is where the fact that TEVA has one of the top three spots in more than 40 markets around the world gives it a very competitive edge introducing new products into markets.
As for the uncertainty regarding the U.S. healthcare system, it’s likely that generics will fare well under any new legislation. President Trump has been outspoken about the prices drug companies charge to both insurers and patients. And, with healthcare costs so high, it’s unlikely that generics will suffer.
Bottom Line for TEVA Stock
All of this means that TEVA is coming out of a dark tunnel and onto a clear road. Its valuations make TEVA stock a bargain. Its sales show that the company is moving in the right direction. And, macro health policy is also pointing in the right direction.
In the past month, TEVA is up more than 5%, and some investors have started to believe that TEVA is oversold here. What’s more, TEVA stock delivers a solid 3.83% dividend yield at current prices, which certainly pays for some of your patience during its turnaround.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.