Turnaround believer Buffett's big Teva investment sends shares soaring

Analysts may have their concerns about Teva’s growth prospects, but Warren Buffett apparently still likes what he sees at the Israeli drugmaker.

The billionaire’s holding company, Berkshire Hathaway, upped its stake in the generics giant in the second quarter to 43.2 million shares, according to a regulatory filing. Those shares were worth more than $1 billion as of June 30, The Street notes.

Teva investors were pleased with the news, and they sent shares skyward in response.

Buffett’s move comes as Teva's new management works to dig the company out of serious debt, in part with a $3 billion cost-cutting program that’s proved popular with analysts and investors. Despite the progress on that front, though, the company’s shares still took a hit after Teva’s second-quarter earnings announcement, a slip Wells Fargo analyst David Maris attributed to shareholders expecting too much too soon.

"We believe the stock sold off for a variety of reasons, but if we had to choose a primary reason it would be because expectations were running high into the quarter," he wrote in a note to clients at the time.

Others, such as RBC Markets’ Randall Stanicky and Jefferies’ David Steinberg, have expressed worries about Teva’s longer-term revenue outlook, despite an ongoing rollout of CNS drug Austedo and a forthcoming launch for closely watched migraine candidate fremanezumab.

"There may not be much significant new revenue contribution beyond Austedo and fremanezumab until Teva’s earlier-stage pipeline in biologics and biosimilars reaches the market in 5-6 years or more," Steinberg wrote earlier this month.

Still, the restructuring—which will claim 14,000 positions when all is said and done—is doing its job, and Teva is even ahead of schedule in that department, CEO Kåre Schultz said on the company’s second-quarter earnings call. And that fact has left some industry watchers, such as Credit Suisse analyst Vamil Divan, M.D., feeling positive about the stock.

He and his colleagues "remain optimistic" about the "ongoing turnaround story," he wrote recently.

Berkshire first reported that it had put its money behind Teva back in February, when it said it had grabbed 18.9 million American depositary receipts worth close to $358 million.

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