Teva - Opps vs. Opioid - Exploring the angles

All,

Please find our updated analysis on Teva here.

We exited our long position in August 2020 after a successful trade, but have now re-examined Teva from a short perspective, given the landmark trials have recommenced after the pause during the Covid crisis. Fundamentally, Teva continues to deleverage and deliver on its operational plans.

Litigation update:

In late April, the litigation trial between Johnson & Johnson, Teva, Endo and AbbVie's Allergan, with three California counties (Santa Clara, Orange and Los Angeles) and the City of Oakland commenced. This coupled with the New York state court trial scheduled to start next month, plus the West Virginia case against McKesson Corp, AmerisourceBergen and Cardinal Health are seen as bellwether trials and are hoped to spur broader settlements to end the opioid litigation.

Trade Parameters:

The idea was to short the 2026s to benefit from a 15 point drop if rulings turned out negative while suffering only a limited rise in case they went well. The trade would be against the odds, as there is only a small probability of a substantial negative ruling, while any settlement along those already provisionally agreed with 4 Attorneys General would likely see the bonds trade to 3-4% yield, in line with other BB names.

We will continue to monitor the situation and would be happy to discuss any alternative ideas.

Tomás
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