Check Point to pass Teva as Israel’s biggest firm
Gap in market valuation of companies narrows to just $206 million
The continual decline in Teva Pharmaceutical Industries Ltd.’s share price is likely to cost the company its status as the largest Israeli company.
Teva’s market cap has dropped by $14 billion in recent days, reaching $17.8b. on Thursday. Following a 27% surge in its share price this year, Check Point’s market capitalization has reached $17.6b.
The gap in value between the two companies is now only $206 million. If the trend persists, the order of the two companies will be reversed, and Check Point will become the largest Israeli company in terms of market cap. The supplanting of Teva by Check Point also signals the prosperity of the technology sector in Israel, while conventional industries are languishing.
Founded and managed by CEO Gil Shwed, Check Point provides cyber security solutions. At the end of 2016, Check Point had 1,900 employees in Israel (44% of its total personnel), with the company being in the midst of expansion. Shwed said several weeks ago that the company now had 400 available jobs in Israel.
Teva, which had 6,900 employees in Israel at the end of 2016, 12% of its workforce, is seeking to lay off 350 employees by the end of the year as part of its cost cutting program, due to its dire financial straits.
Teva considers sale of Medis
Of the Israeli companies listed on Wall Street, the one with the third highest market cap is Mobileye, which develops driving safety systems. The sale of Mobileye to Intel for $15b. was completed last week. Other prominent Israeli companies include Amdocs Ltd., which provides billing and IT customer support systems, with a $9.6b. market cap, fertilizer company Israel Chemicals, and the Elbit Systems Ltd. defense company. The market caps of each of the latter two is around $6b. Incidentally, although Elbit Systems is an industrial sector company, it has clear technological characteristics, which last week propelled its market cap to a new high.
The difference between the market caps of Teva and Mylan, one of Teva’s main competitors in the global generics market, is also narrowing. Momentum in the Mylan share has also been negative in recent months, but the nosedive in Teva’s share has reduced the difference between the two companies’ market shares to $571m.
Teva’s share price was down 4.3% in New York on Wednesday, bringing the drop in the company’s market cap since it published its reports last Thursday to 44%. The stock dropped about 1.4% on Thursday, then rose 0.64% on Friday, closing at $17.30 per share.
The Bloomberg news agency reported on Wednesday that Teva was expediting the sale of assets that were not part of its core business. Teva has already announced its intention of selling its women’s health and oncology activity in the framework of its efforts to service its $35.1b. balance sheet.
According to Bloomberg, Teva is considering the sale of Medis, its division in Iceland that develops generic drugs for other companies. Teva is also considering the sale of its respiratory products business. According to the report, Medis is likely to be sold for $500m.-$1b., depending on which of its drugs are sold.
Teva told Bloomberg that it was looking for any way of focusing and streamlining its business, its processes, and its structure. In this context, a sale of Medis is likely to be subject to the signing of a final agreement with a buyer and obtaining regulatory approval.
Teva’s credit rating lowered
Concerning its respiratory products, Teva said that it did not respond to market rumors. Teva’s respiratory products were the only ones of its ethical drugs for which revenue grew in the second quarter. Sales in this category totaled $322m., 3% more than in the corresponding quarter last year.
While Teva announced several years ago that it would stop investing in R&D in women’s health and oncology products, respiratory products continued to be regarded as part of Teva’s core business, together with the central nervous system. A possible sale of this category shows the extent of Teva’s plight.
Teva has to service its debt, and is liable to reach a state of noncompliance with its financial covenants this year. Both Moody’s and Fitch downgraded Teva’s credit rating last week, and both gave Teva’s rating a negative outlook.