US hedge funds reduce Teva exposure

Teva Photo: Tamar Matsafi

Some financial institutions see an opportunity in Teva's low share price and have increased their holdings in the company.

According to their reports to the US Securities and Exchange Commission (SEC) in recent days, a number of prominent US financial institutions have reduced their exposure to Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). These funds include billionaire John Paulson's Paulson & Co. hedge fund, which sold 64% of its shares in Teva, and Fidelity Investments, which reduced its holdings in Teva by 39.1%.

On the other hand, some financial institutions apparently saw an opportunity in Teva's low share price in the second quarter, and increased their holdings in the company (the share price continued its downtrend after the second quarter), for example BlackRock Investment Management, Franklin Resources, and Boston-based Wellington Management. Israeli fund Sphera, which also sold all of its Teva shares in the second quarter, went back to investing in the company in the third quarter, buying 400,000 shares with a current value of $4.7 million.

Teva's share price, in which the trend was already negative before last summer, went into freefall in early August after the company published poor second quarter results. Teva cut its dividend, downwardly revised its guidance for the year, and recognized a huge $6 billion decline in goodwill for its generics activity in the US. Following the news that Kare Schultz had been appointed CEO of Teva, the share price recovered slightly in September, and its share price at the end of the third quarter was $17.60, 47% below the price at the end of the second quarter.

At the beginning of the fourth quarter, however, trouble again closed in on the company, with Mylan N.V. (Nasdaq: MYL; TASE: MYL), its competitor, obtaining marketing approval for a generic version of Teva's flagship product, Copaxone. The company reports published in early November showed continued erosion in Teva's generics business, and also included a further downward revision in its guidance, pushing the company's share price down to just $11.80.

JP Morgan buys Teva shares from Allergan

The holdings of institutional funds and groups in Wall Street-listed companies are reported up to 45 days after the end of each quarter. These institutions have therefore published their holdings in various companies in recent days, including Teva, as of the end of the third quarter. Among the most prominent figures, the holdings of Texas-based investment company Barrow Hanley stands out; the company sold 84.3% of its holdings in Teva - 25.2 million shares, leaving it with only 4.7 million shares with a current value of $55.4 million. Fidelity sold 16.7 million shares, leaving it with 26.1 million shares having a current value of $307 million.

Another Teva-selling fund is Nordea Investment, which sold 99% of its holdings in Teva, leaving it with only 175,000 shares having a value of $2.1 million. Paulson sold 4.3 million shares in the second quarter and 3.4 million shares in the third quarter, leaving it with 2.5 million Teva shares having a $28.9 million value.

Capital Research, which had the largest stake in Teva of any financial institution, sold 6.2 million shares, leaving it with 70 million shares (6.5% of Teva's capital) having a current value of $824 million. It is interesting to note that JP Morgan also reduced its holdings in Teva by 72%, from 7.2 million shares at the end of the second quarter to two million shares at the end of the third quarter.

It was announced on Monday that JP Morgan was buying 25 million Teva shares from Allergan in a deal that also includes a loan to Allergan of an undisclosed amount, for which Allergan attached its entire remaining stake in Teva (before the deal, Allergan held 100 million Teva shares, 9.9% of Teva's share capital). Wellington, on the other hand, bought 10.9 million Teva shares, increasing its stake in the company to 35.3 million shares (3.3% of Teva's share capital) with a current value of $415 million. Franklin bought 6.7 million Teva shares, and now has a 6.8% stake in Teva with a current value of $863 million.

Published by Globes [online], Israel Business News - www.globes-online.com - on November 15, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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Teva Photo: Tamar Matsafi
Teva Photo: Tamar Matsafi
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