In the world of global pharmaceutical companies there is the name brand which invent drugs and have a 21 years monopoly to sell drugs at higher prices and the generic drug makers who make those pills as soon as the monopoly comes off and this decreases drug prices. The largest generic pharmaceutical is call Teva Pharmaceutical Industries based in Israel. In mid December as reported by Tova Cohen and Ari Rabinovitch of Reuters, Teva reported it was cutting its workforce by 14,000 people and suspending its dividend. The problem is debt – the company bought Allergan’s Actavis generic drug division for $40.5 billion. The company has $35 billion in debt and needs to pay down the debt and now has to save money (not pay it or layoff employees) and worry about cash flow.

The biggest market for generics is the US and prices have gone down (amazing drug prices going down), it is expected some drug prices will continue to fall in 2018 making some generics unprofitable. As the world’s largest generic drug manufacturer it does have a wide portfolio of drugs and some of them might be able to raise prices.

Linking to dividend paying stocks, on the face of it, the cost to produce pills should be relatively small. The company does not pay for the research and development and once the patent comes off, the formula is available to be produced. It should be a relatively easy method to make money, until debt becomes too high. It is always important to watch your investments – can it pay its debts, what is the cash flow and is the dividend supportable? the questions tend not to change as the year changes.

There are more questions than answers, till the next time – to raising questions.