Teva - no mention of opioid settlement, business continues to deleverage

All,

Please find our updated analysis on Teva here   

We are exiting our long position in the Euro 27’s, as with everything in the Teva structure trading tighter than 5% we question the further upside in the position. This trade has been a successful position for us, entering the 27’s in the low 70’s, the time has come for us to exit.  Teva has shown significant deleveraging and we we are confident that Teva will have a deal in the vicinity of what has already been proposed and that the Company will be able to meet its obligations.  But the downside risk does remain. 

It is remarkable that on the Q2 Conference call earlier this month there was very little discussion by analysts on the postponed trial in New York and any possible settlement.  As a recap, four state Attorney Generals have created a framework settlement agreement and Teva and all the various stakeholders were hoping to use this agreement as a basis for a global settlement.  However due to Covid-19, and the postponement of the New York trial (suppose to be the triggering event) the talks have drifted, albeit “positive dialogue with the Ads but no clarity on when exactly the framework will come to fruition”.

Additionally, the Company remains in dialogue with the Department of Justice in relation to the price fixing investigation.  The Company didn’t provide any update on timing or which route (legal system or resolve via negotiation).  

There is the risk that the US may see a need to overhaul their system of supplying drugs and vaccines and that now more than before communities will be looking to negotiating even more aggressively with the Pharma companies. As a mittigant, the public position of Pharma companies is immeasurably improved since the outbreak of the disease and speed of cashflows (higher if accepting the proposed settlement) will also be important. 

Happy to discuss

Tomas