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Allergan Signals Higher Prices Potentially Ahead for Teva Pharmaceuticals

Teva Pharmaceuticals (TEVA) lost 24% last Thursday after reporting disappointing earnings. From the Seeking Alpha transcript of the conference call:

“All of us at Teva understand the frustration and disappointment our shareholders are feeling…

In our U.S. Generics business, we experienced accelerated price erosion and decreased volume, mainly due to customer consolidation, greater competition as a result of an increase in generic drug approval by the FDA, and some new product launches that were either delayed this quarter or got subjected to more competition..

…we expect to have no contribution from our businesses in Venezuela to earnings in the last two quarters of 2017…”

To fix the issues:

“…we are focusing on streamlining our businesses to meaningfully reduce our cost base…We recently concluded a full review of our specialty R&D pipeline with the assistance of an experienced outside adviser in order to rationalize and focus our pipeline assets and maximize return on investment. We are also in the final stages of engaging world-class consulting firm to support our U.S. Generics business. We like the full potential of these assets in light of the evolving environment…

…our board has authorized a reduction in our cash dividend by 75% to $0.085. This reduction represents approximately $260 million of cash per quarter.”

Investors clearly had no patience for any of this news. After three full days of non-stop selling and a devastating downgrade from Morgan Stanley (MS) going from equal to under-weight, TEVA has lost a stomach-churning 40.5% since its...