Will Teva core relocate to US?
Potential fight over control of pharmaceutical company following illness of legendary chairman Eli Horwitz may lead to possibility of moving its headquarters to America
Teva, a dominant player in the global generic industry, is one of the leading manufacturing companies in Israel and considers one of its best performers. Changes in the local US government policy, escalating medical costs, expiring drug patents and demographic trends are the four major trends that relocation may pursue and perhaps enable a position to ride the tailwinds higher in the American market - 60% of Teva sales are to North America.
High officials at Teva rejected the notion that such an initiative is being organized. Teva’s Vice President today is Dr. Philip Frost, the former Ivax CEO that was purchased by Teva. Dr. Frost holds 1.6% of Teva’s shares - the largest private holder of Teva shares.
The company’s regulations determine that the managerial centre of Teva is in Israel and so are the shareholders meetings and the directorate. A decision to transfer the core management to the US requires approval of 75% of Teva's leading directors. It would be a challenging step to recruit such a support, especially since the company is mostly owned by the public and well spread among its shareowners.
Teva finished the 2009 year with $13.9 biliion in sales, a 25% improvement from 2008. Teva CEO Shlomo Yanay admitted that it was a very good year for the company. He projected that sales for 2010 are estimated to grow to $16 billion that will be achieved both through acquisitions and internal growth.
Teva is the dominant player on the world stage, with 25% of the market in the US thanks to the acquisition of Barr Pharmaceuticals Inc. In appearances on the Business News Network (BNN) during recent months, Teva Pharmaceutical has been a top pick of Mr. Levine, Mr. Richards and Laura Wallace, managing director of Coleford Investment Management.
Risk factor
During the bear market decline, Teva stock held in like a rock. “It is both defensive and growth orientated,” Mr. Levine remarked on BNN, according to stockchase.com. It rose steadily from $30 to just under $50 during 2007, slipped only to $42 by the end of 2008, and resumed its rise in 2009 to the current peak near $55.
Past price patterns in Teva's stock also appeal to Mr. Richards: “There are few stocks that I can think of that have demonstrated such a clean, predictable rise along an easily defined trend line as Teva's.” Its stock chart shows a pattern of higher lows and higher highs since trading began in 1982 at a split-adjusted price near 40 cents.
Teva has patented drugs of its own, the largest being Copaxone for multiple sclerosis. The risk factor here is that Copaxone is scheduled to go off patent in 2014. As well, a recent, highly publicized study suggested that multiple sclerosis potentially has a surgical, not pharmaceutical, treatment.
Shlomo Yanay added at the conference which published Teva’s yearly results that “Teva's results express the company's ability to quickly respond to the market atmosphere along with the strength of the balanced business model. Both enable us to get a profitable growth from year to year.”
Reprinted with permission from Shalom Life
