by SignalFactory · January 10, 2022 | 11:17:21 UTC
EverQuote isn’t the only company on the list that’s making a repeat appearance. Brand-name and generic-drug stock Teva Pharmaceutical Industries (NYSE:TEVA) looks to have the puzzle pieces in place to double.
In terms of valuation, pharmaceutical stocks don’t come any cheaper. Shares can be scooped up for roughly 3 times Wall Street’s forecasted earnings per share in 2022. This exceptionally low price-to-earnings ratio is a function of the opioid litigation Teva and its peers are facing, as well as other factors, such as generic-drug price weakness and a leveraged balance sheet.
Teva’s secret weapon continues to be its CEO, Kare Schultz, a turnaround specialist who, since taking over in late 2017, has slashed annual operating expenses by billions of dollars, jettisoned non-core assets, and reduced the company’s net debt from north of $34 billion to about $22 billion. There’s no question Teva has more financial flexibility now than it did four years ago.
The key to Teva’s doubling would be a resolution to the more than 40 state-level opioid lawsuits. Schultz is looking for ways to remove Teva’s legal overhang. The thing is, Teva and its peers recently won an opioid trial in California. With momentum now shifting, Schultz may be able to broker a nationwide deal that involves free or discounted generic medicines, as opposed to a cash settlement. If this litigation overhang disappears, Teva could soar.
Teva has reached an agreement with the state of Texas to settle its opioid-related claims.
As per the terms of the agreement, the company will pay $150 million to the state over a period of 15 years and will provide Narcan (naloxone hydrochloride nasal spray) worth $75 million over a decade.
The President and CEO of Teva, Kåre Schultz, said, “While the settlement includes no admission of wrongdoing by Teva or its affiliates, it remains in the best interest of Teva to put these cases
Now, if you’re a value investor who doesn’t care about dividend income all that much, brand-name and generic drug developer Teva Pharmaceutical Industries has all the makings of a no-brainer buy.
Without sugarcoating it, Teva has had a miserable five-year run. We’ve seen a bribery settlement with the Justice Department, executive turnover, a complete shelving of its dividend, and a mountain of litigation concerning the company’s role in the opioid crisis. All of these factors, coupled with its debt load following the Actavis acquisition, have cast a gray cloud over Teva. However, the sun is beginning to shine through in some places.
Teva is also well-positioned to take advantage of an aging America and rapidly rising brand-name drug prices. As of the one of the world’s largest generic-drug producers, its pricing power and volume should improve over time.
At less than 4 times Wall Street’s estimated earnings per share in 2022, Teva looks like a steal.
One thing many pharma companies declined to include in their New Year’s resolutions? Lowering the prices of expensive brand-name drugs. Within the first few days of the year, drugmakers have raised U.S. list prices on more than 400 meds, GoodRx reports.
So far in January, drugmakers have hiked the prices on 434 branded drugs by an average of 5.2%.
GlaxoSmithKline and Teva Pharmaceuticals each raised prices on more than 30 products. More than 20 price increases from generics juggernaut Teva landed well above the industry average at 9.4%, according to GoodRx. GSK’s price bumps, meanwhile, ranged from 2% to 7%.
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