Teva's Stock Buyback Plan, One That Makes Sense (TEVA)

Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) is proving why it is one of the top ten stocks to own for the next decade.  The company has authorized the repurchase of up to $1 billion of its ordinary shares/ADRs over the next 12 months.  Normally we would prefer to see a company like Teva make acquisitions or pay dividends, but the issue at hand is that Teva has made acquisitions and it has a dividend.  This buyout plan looks very opportunistic and good for shareholders at a time when its shares have not performed as they had in the past.

The company said that it “remains committed to executing its long-term strategic plan, including future acquisitions and expansion of its generic and branded R&D programs, and to achieving the revenue and non-GAAP net income targets presented in January 2010 of $31 billion and $6.8 billion by 2015.”

Also noted was that the repurchase program can be carried out without limiting Teva’s plans nor will it hinder its ability to meet its other capital requirements.  Teva saw $13.9 billion in net sales in 2009, and Thomson Reuters has estimates of $16.35 billion for 2010 and $19.02 billion for 2011.

Shares closed at $50.04 on Tuesday and shares are indicated up a half-percent so far in pre-market indication in U.S. trading of the ADR.  The market cap is roughly $45 billion and the 52-week trading range is $46.99 to $64.95.

After a steady run followed by a large pullback, that is when buybacks make more sense than at other times.  It can signal the end of an era of growth in many cases, but Teva has outlined its growth ambitions out to 2015 and that is more clarity than most major Big Pharma players are willing to commit to.

JON C. OGG