Teva – a lot of threats, one chance; Is the company on the way to be sold?Pfizer and Milan are merging the generic activity in order to “kill” Teva; Nature needs a solution – to be sold is the reasonable alternative; All the data on the big merger in the generic industry, the threats and troubles in nature, and the expected moves of Teva’s managementTeva may be saved, but we lost. Hundreds of billions of sales over the years, tens of billions of profits; Billions of taxes, tens of thousands of employees – all that will be gone. Nature is on the way to being sold or merged.The fall of Teva is especially painful, because it is a society that for 100 years has been well managed and functioning, and has grown year by year slowly and patiently. Not without mistakes, but small mistakes. And then Erez Vigodman, the former CEO, and Eyal Desheh, the former CFO (now chairman of Isracard), came to the conclusion that we should go big and buy the generic division of Allergen in exchange for nearly $ 40 billion.
One mistake that exceeds hundreds of successes. But it would have been forgiven if this arrogant management had admitted wrongly, paying a fine and leaving the deal. At a certain stage the entire market realized that this price was very high and the company had an escape route. Teva’s management made a second mistake and did not pay the fine. This is the worst mistake of all. Teva fell not because of the generic competition, the claims, the decline in Copaxone, but because of the Allergen deal, which caused it to die, caused it tens of billions of losses, and made the company’s situation apparently irreversible. One stone thrown into the well, a thousand wise men will not spend – the current management of Teva, trying, but for the time being, without success.Maybe now there will be a solution. Not an ideal solution. Forget Teva’s comeback. A modest solution, a solution that will enable nature to be saved. The trigger is the deal being forged between Pfizer and Meilan, which will merge their generics activity into the largest company in the field, and more importantly – a company that can strike at Teva without mercy (expansion of the deal). It is big, it is strong, and it has no problem with money – it can “kill” Teva, which is in the midst of an endless cycle – weak, beaten and controlled.
Sounds bad? But now you see the light at the end of the tunnel. patience.Nature ‘s TroublesI’ll start with the empty glass. The last two years in Teva have been very challenging – Copaxone, the original treatment for multiple sclerosis that accounts for about half of the profits, is falling in sales mainly due to generic competition, and earnings shrink accordingly.The new original developments do not tick the sales of Copaxone, and are far from adequate compensation.In the main arena of the business – the generic drugs – was supposed to be stable, after a long period of erosion in sales and profit. But the last few quarters are still showing weakness, and especially the great uncertainty about the future.The competition in Genreka has long been a game not only for the big ones – Teva, Meilan, Sandoz. There is a long list of other generic companies, and the Indian companies that are able to produce low costs are the dominant competitors.
And the biggest problem of all – nature has already lost independence. Teva does not control its fate. It is controlled and led. It is controlled by Wall Street bankers who decide whether to supply the company with some oxygen. It has cash to go through the near term, but the repayments of another two and three years are uncertain.The calculation is simple: Teva will generate free cash (after investments) of up to $ 1.5-2 billion per year (according to Management’s forecast). This amount reflects the interest on bonds (financial debt, mostly bonds, of nearly $ 29 billion, and net debt of $ 27 billion). it is not enough. To repay a significant portion of the debt itself, Teva will need far better performance than the forecast. It will not happen in the coming years.Teva will therefore have to woo Wall Street’s bankers. They are educated, smart, respectful, well-dressed and articulate people, but under this envelope there are people with a knife between the teeth that care mainly for their pockets, and they smell blood. For them, this is an opportunity for a deal in the style of “Want money, give shares, give control.”
Teva is also controlled by debt holders, who have become very dominant against a net debt of $ 27 billion, and are now reporting that it will be difficult for the company to refinance the debt. The yield on Teva’s long-term bonds approached 10% last week, and it is difficult, almost impossible, to recycle debt.Nature is also controlled by its competitors – they can increase competition and try to take a weak currency market share. But, and here was luck – Teva’s competitors, in distress. Meilan also carries huge debts, Perrigo is loaded with debt and lacks focus. Novartis’s Sandus has a head above the water, but also suffers from erosion in profitability. These Indian companies are dominant in the competition and still do not have significant market share.Pfizer and Milan merge into a generic giant; The goal – to “kill” Teva
But here, too, there is a hard line to nature. Pfizer and Milan, according to the Saturday report, are expected to join forces in the generic field. The two companies will establish a joint company that will absorb Pfizer’s activity in the field and the activity of Meilan in the field.Ostensibly, bad news for battered nature. Bad news for investors who have seen the share fall in the last two years from $ 30 to $ 7.5. There were many who were tempted to buy during the fall, it was dangerous, and were warned in time (but I am against self-publication), although of course there are no prophets. In any case, the question of what is next? So, as previously stated, bad news for nature. In practice, this may speed up a merger or acquisition deal with one of the giants (or other entities) – that is, this merger may actually provide a natural solution.In any case, a merged company between Pfizer and Milan will overtake Teva in sales, become a market leader, and will have a huge back. Pfizer is one of the world’s largest pharmaceutical companies. The company trades at $ 240 billion, its capital is over $ 60 billion, it sells over $ 50 billion and makes over $ 16 billion a year.
Pfizer has a net financial debt of about $ 20 billion, but everything is relative. This is a debt that it covers in a year and a little (the company generates cash in excess of $ 16 billion a year – similar to the annual profit), and beyond that – in relation to its value and its activity is a small debt. In fact, Pfizer brings to the generic merger with Meilan significant activity and also financially quiet.The merged activity (if and when the merger is completed) will sell $ 20-22 billion, according to estimates, although the US Antitrust Commissioner may force the merged company to sell activities. A moment before the merger, Meilan sells about $ 12 billion a year (most of the generic activity), and generic and non-patented products and generic products sell at $ 12 billion.Pfizer, by the way, has entered the field of generic and patented products primarily to protect its original products. Under US law, after the period of exclusivity, a generic company (for a six-month period) can enter the generic market and then other generic companies, with the source company often in preference if it launches the generic drug. It’s a sort of competition for a company with itself, but it’s better than giving the profits to someone else.
The merged company will be significantly larger than a currency that sells drugs at a rate of $ 17 billion, of which $ 10-11 billion is generic drugs. Beyond the quantitative strength, the merged company will be strong mainly because it can make moves that Teva will not be able to meet, thanks to its financial backing. Let’s say, for example, that the merged company is willing to sacrifice the time to take market share. Legitimate and acceptable in all fields and certainly in the field of drugs. How do you do that? Simply – lower prices, and wait …f the competitors lower the price, the market share will probably not change, but the profitability of the company and of the competitors will decline. The merged company has a strategy of taking market share, and it can wait, it has no problem earning less. On the other hand, Teva is more sensitive to profit and cash flow. She has a debt to serve. The last thing it can withstand is a continued erosion of profits. Several such quarters and the merged company can “kill” Teva.
The second option is that Teva will not lower prices, and then the merged company will take a market share at the expense of Teva, which did not lower its price but lost sales and profits. The result will be similar. The merged company, thanks to its financial back, controls the game, controls nature.Coming soon: Teva’s reactionThese scenarios are known to Teva’s management. In fact, these scenarios have long been known. In nature, we know what is happening in the market, about the trends, the intentions, the talk among the companies. Teva itself is a player of mergers and acquisitions, and make no mistake – even in the era of Car Schultz there is official or unofficial talk between industry bodies and investment bankers. Nature on the shelf, the question is only a question of price. Nature is far from being a seductive commodity, it has a heavy debt, there are unclaimed demands, it takes courage and absorptive capacity to acquire it.Meilan is cheaper than a coin (see Nir Hatzav’s test). That’s one of the reasons she was first bought. The question is, what will happen after the report – will the talks between Teva and the other companies rise to a merger or acquisition? Nature is very important. In the competition against the new giant, it is expected to lose.
You can think of Pfizer’s competitors who do not want to see her as a leading player in both fields – ethical drugs and generic drugs, and in general, the large and rich pharmaceutical companies, can put their hands on impressive generic activity at a relatively reasonable price With a large debt and open claims). Some of them probably thought or thought about it. Again, it’s all a matter of price, and when the price is at a low of $ 7.5 per share, it can actually be an appropriate meeting point between buyer and seller.Another possibility is raising capital. It did not happen for $ 16, and not $ 14, so it’s hard to believe that Teva will issue $ 7.5 now, but this possibility is on the table, although its probability seems relatively low.Teva is now less Israeli than in the past. Its management is no longer Israeli, its shareholders have long been scattered among various bodies around the world. The management of the past defined it as a global company with an Israeli center. But the production here is expensive, and CEO Schultz cut him mercilessly, and the R & D is both expensive and shrinking. And the headquarters – that’s not the point, Mate can be anywhere, and in general – the size of nature, she has several headquarters around the world. Then it was less Israeli than in the past, but it may just disappear from here, like many good things that were acquired, disappeared and passed.
So yes, Teva may be saved, we are going to lose the people’s share, and the flagship of the past decades.Altshuler Shaham enters the field of basket funds – offers funds at low management fees; The public will benefitAltshuler Shaham and Blackrock, one of the largest financial management bodies in the world, received the approval of the Israel Securities Authority to launch 15 mutual funds tracking major world indices; This is a shock to the basket funds market – the management fees of most of these funds are attractiveThe funds are the first foreign exchange funds available for purchase in shekels, and are expected to increase the level of competition in the sector, in light of the relatively low management fees they are expected to collect. According to the report, Blackrock and Altshuler Shaham plan to register additional foreign basket funds for trading in Israel in the near future, subject to the approval of the regulator.mong the principal funds launched by Altshuler – the basket fund on the Nasdaq and the S & P index – are mutual funds with 0.07% and 0.33% respectively, significantly below the management fees of the other funds in the same category. Lower even if the foreign funds divide the dividends and there is an additional cost – a tax on the dividend.The index tracking devices are considered preferable products to the majority of the public. These instruments provide the index return, and over time, according to many studies, the index can not be beat. True, there are good investment managers that provide excess returns, but in the long term view – there are no magicians, so it is enough to accept the index. In addition, according to many studies, management fees in active management cause the yield to be low, whereas passive management fees are low, mainly because there is no need for management.Mark Pilgram, Head of Strategic Operations and Chief Operating Officer of iShares in Blackrock, Europe, Africa and the Middle East: “The combination of our experience with Israeli investors over the last decade, and our partnership with Altshuler Shaham, a leading investment house in Israel, Investment products to the needs of the Israeli investor, and we are proud to open to Israeli investors, large and small, the possibility of investing in foreign exchange funds denominated in shekels. “
“We are proud to offer investors new options to diversify their investment portfolio through quality products denominated in shekels and at competitive prices, thanks to our long-term cooperation with Blackrock, the largest investment house in the world,” said Ran Shacham, Co-CEO, Altshuler Shaham Investments.Altshuler Shaham and Blackrock, the world’s largest financial asset management company, signed an agreement in 2017 in which Altshuler Shaham was appointed as its official representative, and to the market of Blackrock’s iShares ETFs and mutual funds.The Altshuler Shaham Investment House was established in 1990 by Kalman Shaham and Gilad Altshuler and specializes in mutual fund management, provident fund and pension fund investment portfolios. Gilad Altshuler and Ran Shaham, serve as co-CEOs of the investment house, which manages assets totaling NIS 120 billion.BlackRock is the largest financial asset management company in the world. As of March 31, 2019, Blackrock manages assets worth $ 6.84 trillion.
iShares, the world’s largest index products company, has been active in the field for more than 20 years, with a global product range of more than 900 ETF and managed assets totaling $ 2 trillion as of June 30, 2019. iShares funds are managed by investment experts And risk management of BlackRock. Have you received a loan from a study fund or provident fund? The conditions are probably good, but …Most savers are not aware that taking a loan from a study fund or a provident fund means leveraging the investment and accordingly increasing the risk and chance of the saver. It is advisable to enter with open eyes – here are the scenarios for the implications of leverageSometimes, a wise financial decision, such as taking a cheap loan and available from a study fund or provident fund, has side effects of great importance to your saver. Is this a negative or positive side effect? The answer is not unequivocal, and depends, inter alia, on the future yield of the advanced study fund or the provident fund from the moment the loan was taken, the loan rate taken from the total balance, the risk-risk preferences of the saver and other individual parameters such as his financial-pension condition.More articles on:Space stocks are gaining momentum, who are the stars of Morgan Stanley?Loan from study fund and provident fund – good conditions
What is clear is that the terms of the loan from a study fund or a provident fund are good. In other words, in the test of the loans that you can take from the banks, credit card companies and in general, this is a good loan. However, most savers are not at all aware that taking such a loan also means leveraging their investment, and accordingly, a significant increase in the risk and chance of the saver.For some savers, those who like to take calculated risks and believe that the impressive performance of the capital market since the beginning of the year will continue, this is a very positive side effect. Under such circumstances, such leverage is expected to increase the effective yield on their shareholders’ equity, beyond the yield that will accrue from the advanced training fund itself. But for risk-averse investors who fear future losses, such leverage exposes them to increased risks they have not taken into account when receiving the loan.In principle, taking a loan from pension savings is one of the
most available and cheapest ways available among alternatives in the lending market. The loan from a study fund or provident fund can be saved from its own money, so it does not require Arabs and is very cheap, usually at variable interest at the rate of prime minus half (currently 1.25% annual). For those with high repayments of loans that are much more expensive than banks, credit card companies and private financing companies, taking a loan from pension savings can significantly lower the cost of credit and ease the monthly cash flow.How much can you borrow?In the case of a study fund or a liquid provident fund, such a loan can be obtained up to 80% of the balance. A non-liquid training fund can borrow up to 50% of the balance, and a non-liquid provident fund – up to 30% of the balance. According to the law, management companies are prohibited from charging additional fees, handling fees and other items that actually increase the effective interest on the loan. So far, this is a wise financial consumption.What is the connection between taking the loan and the financial leverage of the saver?
Suppose that your fund has a liquid education fund of NIS 150,000, from which he took a loan at the maximum permitted rate (80% of the balance) in the amount of 120 thousand shekels. The amount of the loan is not deducted from the balance. This means that the fund’s performance in the capital market applies to the entire sum – 150 thousand. Management fees are also collected from this full amount. But what is the actual amount of investment, what is the real equity of the saver? The answer is only NIS 30,000, that is, the original balance less the loan amount.