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Teva Pharmaceutical Industries Ltd (TEVA) Stock Is a Deep Value Play

TEVA is the largest generic drug maker in the world, and is selling for a song

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Teva Pharmaceutical Industries Ltd (NYSE:TEVA) came on my radar around 1996, when a friend who had just been diagnosed with multiple sclerosis mentioned that TEVA had a drug called Copaxone that treated the disease. This was intriguing because it was also the first time TEVA had ventured into creating its own drugs. It was, at that time, a big player in the generics market.

In fact, the Israeli company was one of the first businesses to emerge on the public markets after the creation of the State of Israel, going public in 1951. Over the ensuing decades, it made many acquisitions and expanded operations.

By 2010, it had sales of over $16 billion, and continued with its acquisition binge, snapping up familiar names like Barr Pharmaceuticals, Arana Therapeutics, Cephalon and Actavis Generics.

It now has subsidiaries all over the world, and continues to manufacture and distribute both generic and specialty medicines. In fact, it is the world’s largest manufacturer and marketer of generics.

On the specialty side, besides Copaxone, it owns Azilect for Parkinson’s, Nuvigil for narcolepsy, and numerous respiratory products. If you know anyone with asthma, there’s a good chance they are using ProAir or QVAR, made by TEVA stock. The company is also pushing several new biosimilar drugs to market.

However, TEVA stock has been slammed pretty hard by a host of bad PR lately. There are now forty states which are suing Teva stock, along with other generic companies, for allegedly colluding to push up the prices of an antibiotic and a diabetes drug. Analysts at Argus project generic prices to fall 7%-10% this year. Copaxone went off-patent. Worst of all, the CEO stepped down after it was disclosed a Department of Justice investigation into bribery in Russia and Mexico.

Meanwhile, TEVA took on a ton of debt to buy out Actavis. $5.3 billion of debt is due in 2018, and another $16 billion due over the next four years.

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