Teva chief reports 'strong progress' in restructuring plan
JERUSALEM -- The chief executive of Teva Pharmaceuticals on Thursday said he is making "strong progress" on the company's restructuring plan, even as the company posted a huge loss and forecast a challenging 2018.
In an interview, CEO Kare Schultz said he remained confident about the company's long-term prospects, laying out a two-year turnaround timeline and predicting a "clear move upward" in 2020.
The restructuring has marked a stunning setback in Israel for a company seen as a national source of pride.
Teva posted a loss of $11.54 billion, or $11.41 a share, in the fourth quarter of last year, compared to a loss of $973 million, or $1.10 a share, for the same period a year earlier. Revenue fell to $5.46 billion from $6.49 billion. It cited the weak U.S. generics market, where drug makers face huge pressure from payers to lower prices, as the main reason for its loss.
Looking ahead, it forecast revenue of $18.3 billion to $18.8 billion for 2018, down from $22.4 billion last year.
The results and soft outlook sent shares lower. In midday trading, its shares were down 9 percent to $18.97 in Nasdaq trading.
Teva, the world's No. 1 generic drugmaker, has been hit hard by price pressure and competition in its core generic business, the loss of patent protection on its blockbuster multiple sclerosis drug Copaxone and a more than $30 billion debt load stemming from its acquisition of the generics business of Allergan. The struggling company announced plans in December to cut 14,000 jobs, over one quarter of its global work force.
Schultz, who joined Teva last fall, said the restructuring plan is going well, saying roughly half of the layoffs should be complete by July, with the remainder taking place by the end of 2019. The company also has eliminated some of its generic drugs, shed noncore units, such as its women's health business, and lowered debt. "Everything is on plan. Everything is on target," he told analysts.
Vamil Divan, a senior analyst at Credit Suisse, praised the company's actions during a tumultuous two months. During that time, it has lost its investment grade credit rating, restructured lending covenants and been placed on CreditWatch by Standard & Poors.
"Overall, we think the team has done a commendable job in rapidly improving Teva's near-term financial outlook," he wrote.
Schultz said the company expects both Copaxone sales and the generics business to stabilize in the coming years as it introduces three new brand-name drugs to the market.
Austedo, a treatment for movement disorders like Huntington disease and tardive dyskinesia, was introduced late last year and should deliver some $200 million in sales this year. That number should grow down the road, Schultz said in the interview.
Teva aims to introduce a migraine treatment, fremanezumab, in the second half of the year, though its launch date could be delayed due to problems at a manufacturing facility in Korea. Schultz said Teva is working with the FDA to resolve the problem as quickly as possible.
Teva also is in late-stage development of fasinumab, a pain treatment, that he said could boost results several years from now.
"This year and next year we are implementing the restructuring, reducing the cost base, we are stabilizing the generics business and we are launching the specialty products," he said. "So basically when we come to '20, we should see a clear move upward in both the revenue and the earnings."
He said he expects the company's earnings to continue to rely roughly 50/50 on generics and homegrown brand-name drugs like Copaxone and Austedo.
With roots going back more than a century, Teva has grown into a major global player over the past 40 years with a series of acquisitions, and by developing original drugs and leading the move toward cost-saving generic medications.
The layoff plans triggered protests at Teva plants in Israel and prompted talks with Prime Minister Benjamin Netanyahu. But after talks with the unions, protests have died down, and Schultz said the company remains on target to cut about a quarter of its Israeli work force. Still, he said Teva remains committed to keeping its headquarters in Israel for the long term.
"You can manage a company from anywhere, but it makes sense to do it from where you have your roots," he said.