Against a background of the most severe crisis in the history of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), investment website www.stocker.co.il set out to analyze just what the world's most sophisticated investment managers think of the company's share price. The stock has been suffering from negative sentiment, falling by 50% from a peak of $70 eighteen months ago, and by 36% in the past twelve months alone.
The decline in the stock price began with takeover battles involving Teva, Mylan and Perrigo, which were followed by the leveraged, expensive, and badly timed acquisition of Allergan plc's generics division Actavis. To that was added the scandal of the acquisition of Mexican company Rimsa, while a constant worry is of course the danger of the launch of a generic alternative to Copaxone, the branded multiple sclerosis treatment that has been Teva's main cash cow for years.
The plunge in the share price led the company's board to dismiss CEO Erez Vigodman. Most analysts cut their price targets for the stock, with JP Morgan standing out by cutting its target to $37, which compares with a market price of $35 at the time.
Although Teva is thought of as "the people's stock" in Israel, the main shareholders in Teva are actually large international funds such as Fidelity, Franklin, and Capital Research Global Investors. According to Stocker, although, and perhaps because, Teva is in crisis and the share price is around $30-35, the funds see a buying opportunity and are snapping up Teva shares in large quantities.
The twenty largest shareholders in Teva, overseas investment entities, hold 37% of the company, worth NIS 50 billion. According to Stocker, in the fourth quarter of 2016, 14 of these investors bought 86.3 million shares, costing about $3 billion, while six sold 21 million shares, for some $735 million. This pattern indicates that most of the investors see Teva's plight as a buying opportunity.
The largest institutional investor in Teva is Fidelity, which held 6.2% of the company at the beginning of 2017. Fidelity actually sold 4.5 million shares in the fourth quarter of 2016, whereas Capital Research Global Investments, Barrow Hanley Mewhinney & Strauss, and The Bank of New York Mellon, the four largest shareholders after Fidelity, bought an aggregate 42 million shares. It appears that most of the institutions expect a positive return on the stock.
It should be stressed that the figures relate to the fourth quarter of last year, before the sharp fall in the share price that followed the decision by a US court invalidating four patents on Copaxone and the departure of CEO Vigodman.
Teva closed at $35.20 in New York on Friday.
Published by Globes [online], Israel business news - www.globes-online.com - on February 19, 2017
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