After turbulent years, Teva CEO Schultz forecasts stability
Teva completed its two-year major restructuring plan in 2019, reducing its cost base by over $3 billion and net debt by more than $9b.
By EYTAN HALONTeva CEO Kåre Schultz at the Tel Aviv Stock Exchange, February 19, 2020(photo credit: SIVAN FARAG)
After navigating two turbulent years of restructuring and debt-cutting measures, Teva CEO Kåre Schultz forecasts a long-awaited year of stability for Israel’s leading pharmaceutical company.“For the first time in four years, we have an outlook which is not significantly better than last year – which is not that dramatic,” Schultz told reporters at the Tel Aviv Stock Exchange, presenting the company’s financial results from 2019.“The only dramatic thing is that if you come from a four-year period where you’re crashing like a stone on revenues and earnings, and all of it sudden it goes flat and a little bit up, then that is a trend break. We want to go up more, but this is the best we can do right now.”Teva completed its two-year restructuring plan in 2019, reducing its cost base by over $3 billion and net debt by more than $9b. Measures introduced worldwide since December 2017 included the closure or sale of 13 manufacturing sites, shutting 40 offices and laboratories, and reducing its full-time staff by some 13,000 employees.The process of restructuring followed mounting debts of approximately $34b., combined with the loss of patent protection on key multiple sclerosis drug Copaxone and a dramatic decline in the value of the US generic drug market.“It was either restructuring or selling the company to somebody else. We managed to do it while, most importantly, maintaining full operational capacity. We were still able to produce more than 80 billion tablets every year,” said Schultz. “Because we had a worldwide presence, we had to do a worldwide restructuring. The way to get a sustainable future is to get the debt down to a level where it is not a challenge anymore.”Schultz said 2019 was a “solid year” for Teva, meeting all guidance targets and concluding the period with free cash flow of approximately $2.05b. While revenues from Copaxone continue to decline, key growth drivers have included rapidly growing sales of Austedo in the United States and the launch of Ajovy in several European countries.“There are over 1,000 generic products currently under development at Teva, and we’re waiting for patents to expire. We’re ready to supply them to the world,” said Schultz. “We believe that in the coming 20 years, a lot of business will be coming up for grabs in drugs going off-patent – $210b. in the US alone.”Turning to the outbreak of the novel coronavirus, Schultz described the situation as a “potentially a very serious challenge to worldwide healthcare systems.” Teva only has very modest commercial operations in China, but has worked to ensure continuity of raw material supplies traditionally sourced from the country.“Maybe, in the coming months, we will have some facts from the World Health Organization about what can be done – not to cure, but whether some of our antiviral products could be used,” Schultz said. “If that’s the case, we’ll try to make sure they are available and donate to China, if possible, as much as possible.”
Schultz also expressed “cautious optimism” regarding ongoing efforts by Teva to settle over 2,500 claims related to its alleged liability in the US opioid crisis. Describing the litigation pursued under state public nuisance laws as “a very creative idea,” he said negotiations during the fourth quarter of 2019 focused on reaching a “final settlement.”“As long as it has not been settled, [the opioid litigation] will be a swing factor up and down on the share price. It is kind of random because you never know what the news will be tomorrow,” said Schultz. “I always tell my people that once this goes away, everybody will look at what is the actual value of the business that we have.”
