Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) saw its market cap fall by $4 billion in the last three trading days on Wall Street to $48.35 billion. Teva's share price fell 5.24% on the Tel Aviv Stock Exchange today alone and has fallen 8% in the past three NYSE sessions.
The losses come as pharmaceutical and biotech shares went into freefall on Wall Street with Nasdaq's NBI biotech index down 19.5% in the past two weeks and the DRG pharmaceutical index down 10% over the past two weeks.
Teva as well as Perrigo Company (NYSE:PRGO; TASE:PRGO) and Opko Health Inc. (NYSE: OPK; TASE: OPK) are all traded on the main NYSE as well as the TASE. In fact Teva has fared better than both Perrigo and Opko, which lost 11.44% and 8.13% respectively on the TASE today. Perrigo, still being pursued by Mylan N.V. has lost 10.7% of its market cap in the past three days trading.
One of the first negative implications for Teva is that its acquisition of Allegan's generics division will now be far more expensive. Teva is paying $40.5 billion for the division of which $6.75 billion is in shares at an average price of $67 per share. Teva plans to raise that amount - $6.75 billion - in a share offering and by raising debt through bonds.
The share offering will be no earlier than November. But if market conditions are not right, the offering could be postponed because Teva has a guaranteed bridging loan from a consortium of 10 major banks for a period of two years, which allows the company room to maneuver without endangering the acquisition.
Bank of Bank of Jerusalem (TASE: JBNK) analyst Jonathan Kreizman said, "The main factor pressuring Teva's share is that the share offering will only begin in mid-November and there is usually weakness in a share before an offering. The share price is down substantially from its peak and that makes the acquisition more expensive for Teva. Teva's share price was around $70 when it announced the acquisition and it is now 18% less. The share price makes the expected dilution more expensive."
On the general performance of biotech and pharma shares he said, "the biotech and pharma markets have performed exceptionally over recent years, and have outperformed the market in their rises. Now they are reacting more severely over the market concerns. This includes macroeconomic concerns and concerns specific to the sector in the US. There is a trend of lowering health costs in the US, which are among the highest in the world at 18% of GDP. These concerns are more marked in biotech than pharma because share prices were more inflated and had risen more strongly, so that now they are falling more strongly.
Published by Globes [online], Israel business news - www.globes-online.com - on September 29, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015