Thesis
After reviewing Teva's (TEVA) latest results, we are left to conclude that significant downward risks remain. EBITDA continues to worsen and management yet again shows their inability to manage investor expectations. Additionally, the decreasing EBITDA has set the company on a course to breach its covenant leverage ratio, which was just recently amended to 5 from 4. Currently, the forward leverage ratio sits at 6.0. While rumors of a $3 billion investment are indeed positive and could provide much-needed relief, we caution that these remain rumors.
A quick recap
On October 24th, we published our Teva earnings forecast in which we alleged that analysts were not correcting for accelerated price compression in Copaxone. Most of the discourse centered on the introduction of a new competitor, Mylan (NASDAQ:MYL), which was, in fact, related to the fourth quarter and not the recently released results of the 3rd quarter.
