Please ensure Javascript is enabled for purposes of website accessibility

Here's What's Pushing Teva Pharmaceutical Industries Stock Even Lower Today

By Cory Renauer – Aug 6, 2019 at 3:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A confluence of bad news has sunk the stock to a 20-year low.

What happened

Shares of Teva Pharmaceutical Industries (TEVA -1.25%), a generic-drug-making giant, tumbled 10.9% as of 3:06 p.m. EDT on Tuesday. The company is scheduled to report second-quarter earnings results tomorrow, and investors are even more apprehensive than usual.

So what

Increasing generic competition for Copaxone and disappearing profit margins in the generic-drug business have exacted a heavier toll on Teva's top and bottom lines than expected. Over the past 12 months, the stock has tumbled 68%, and today's thumping dragged it to a price that investors haven't seen since 1999.

Downward-sloping chart.

Image source: Getty Images.

Consensus estimates suggest top-line sales fell 10% compared to the previous-year period, to $4.25 billion. The big concern is the company's sagging bottom line. Despite efforts to cut costs, consensus estimates suggest second-quarter earnings fell 27% to just $0.57 per share.

Now what

It's hard to say when profits will stop plunging, but we can be reasonably sure that Teva's legal expenses are on the rise. In May, Teva was named in a lawsuit filed by 44 states that allege the world's leading seller of generic prescription drugs conspired with Pfizer (PFE -1.08%), Mylan (MYL), and Novartis (NVS -0.80%) to inflate the prices of more than 100 generic drugs, including cancer drugs, antibiotics, and even generic Adderall. More recently, Teva agreed to pay the State of California a $69 million pay-for-delay settlement.

To make matters worse, Teva's size advantage is about to evaporate. That's because Upjohn, Pfizer's segment of post-market-exclusivity drugs, is merging with Mylan to become even larger than Teva.

If you're thinking about trying to catch this falling knife, you should know there was $27.5 billion in long-term debt on the company's balance sheet at the end of March, and servicing that debt turned an operating profit into a net loss in the first quarter. Even if the company manages to beat expectations tomorrow, there are no guarantees that it will be able to meet all of its financial obligations in the quarters ahead.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends Mylan. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Teva Pharmaceutical Industries Stock Quote
Teva Pharmaceutical Industries
$8.72 (-1.25%) $0.11
Pfizer Stock Quote
$43.98 (-1.08%) $0.48
Novartis Stock Quote
$77.60 (-0.80%) $0.63
Mylan Stock Quote

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.