July 11, 2019

Pharmaceutical company, In the Line of Fire

Being a soldier in a hostile combat zone, where your life and death depends on your agility to survive is a complex assignment. The conflicts of surviving vs fulfilling the mission are overlapping repeatedly, where Maslow pyramid of needs triumph in this battle. Coming from a country known in her challenging environment, Teva should be equipped with an adequate toolbox to cope with the current battlefield. The problems, unfortunately, attend to club together towards an even bigger delinquent, fact that limiting the ability to manage those complex challenges. For Teva it was a free fall out of a cliff; facing strong competition, loss of their most tactical and rewarding jewel, (i.e., Copaxone with no substitution in the horizon), numerous lawsuits with an overall exposer that can reach over $5Bilion and a disruptive debt of currently $28Bilion makes Teva arena one of the most brutal places to be in. Taking the right decisions in this hostile environment is almost impossible but rebelliously impactable with any path you choose. Genericism of drugs led by pioneer Teva was, is and will be an important humanitarian mission. R&D of new drugs is an imperative task, nevertheless making drugs accessible to all layers of economical world habitant might surplus by importance. Having the best in class drug who can cure some type of cancer in an un-accessible price tag, might be more disruptive than imperative for most of the patients, facing limited or no drug accessibility. Generics moto is drugs accessible for every patient in need worldwide. Hence, Teva story needs to touch each and every one of us, as the individual patients of the world, with their special, different but vital needs for adequate affordable therapies. The US is the land of opportunities and known to be very rewarding if you follow the rules and deliver quality products to the right audience at the right time (e.g., first to launch). On the contrary, the US holds the biggest penalties in the world with very united and empower justice system. The metaphor of the beauty and the beast fairytales can best describe the US generic business environment, this gigantic land of opportunities can turnaround very quickly to be a hostile environment. Unfortunately, when you are too drunk from the fruits of success, and just before you sure your invincible and can do almost everything, the most ancient saint come in to play, “the saint of hubris”. It’s amazing and sad in the same time, that (United) “kingdoms” can be built over centuries and can be destroyed over one wrong decision (e.g., Brexit, Teva Actavis deal). Back to the fairytales story sometimes it’s better to let the beast rest peacefully in a safe distance. With all the sadness, I believe that this generic giant had leverage it one step too much and must step down and recap their future moves by declaring chapter 11. This act at least can relief Teva from the outstanding lawsuits, restructure the debt distribution and plan under government supervision their reorganization. I don’t see any company on the horizon, taking over toxic Teva. Even the so-called Buffet proposed merger with Mylan doesn’t make sense. Each of the discussed companies has their own problems, and consolidation of generic competitors don’t necessarily outcome with merger benefits rather than management and administrative realization cost reduction that can sum up in a maximum of 5%. On the contrary antimonopoly US committee might not approve the deal, moreover price increase on products of the discussed merge companies will be scrutinized by the US government for any artificial drug inflation or price increase by the parties, (i.e., the latest price-fixing accuses). I will conclude in wishing that I’m terribly wrong in my prognosis and that Teva will return to growth and prosperity again, as a proud Israeli and current company investor.