Warren Buffett Invests in Teva
Berkshire Hathaway, the investment vehicle of US billionaire Warren Buffett, has acquired 18.9 million American Depositary Receipts (ADRs) of embattled Israeli generics maker Teva. The stake said to represent about 1.9% of Teva’s US-traded shares is worth close to $358 million. It makes Berkshire the tenth largest shareholder of the world’s biggest generics manufacturer.
The stock purchase is the second major move by Buffett into the healthcare sector this year. At the end of January, the investor announced plans to team up with Amazon and JPMorgan Chase to create a technology-driven healthcare provider for the employees of all three companies, “free from profit-making incentives and constraints.”
Buffett said the plan would “check the rise in health costs” that acts as a “hungry tapeworm on the American economy.”
The billionaire did not publicly comment on the Teva purchase, but observers said he was evidently impressed by the $3 billion turnaround plan rolled out by new CEO Kåre Schultz late last year.
Reports circulating last autumn suggested that another billionaire, Len Blavatnik, whose investment vehicle Access Industries was the last owner of LyondellBasell before it filed for bankruptcy at the beginning of 2009, was interested in investing $3 billion in Teva. The investment apparently did not materialize.
Analysts have been talking up the Israeli drugmaker in recent weeks, with Credit Suisse upgrading the company’s share on the news of the restructuring plan that is set to claim a quarter of the workforce while reducing the $31.4 billion debt burden.
“We expect the focus on healthcare spending and, in particular, increased drug spending, to lead to greater utilization of generic drugs both in the US and outside the US, and this is something that should ultimately be a positive for Teva and other large generic manufacturers,” the bank wrote.
In another comment, analysts at Raymond James & Associates said: “Drug costs continue to escalate, Trump is all over prices, and Teva, along with the rest of the generics industry, is part of the solution.”
