Teva’s search for a full-time CEO goes on, but that hasn’t stopped interim stand-in Yitzhak Peterburg taking the axe to the Israeli group’s operations.
The company said yesterday that it intends to cut 7,000 jobs – 2,000 more than previously estimated – and shutter or sell six manufacturing plants by the end of 2017. It also plans to close or divest a further nine manufacturing facilities next year, and halt operations in 45 countries by the end of this year.
The dramatic cutbacks come against the backdrop of missed second-quarter sales expectations resulting mainly from price pressure in its US generics business. A $6bn impairment charge on the unit, a 75% dividend cut and the news that Allergan intends to sell its 10% stake in the company – stemming from Teva’s $40bn purchase of its generics operations last year – have sent the company’s share price into a downward spiral.
“Given the current environment, we have had to take swift and decisive actions,” said Peterburg. “We are focused on executing meaningful cost reductions, rationalizing our assets and maximising their value, actively pursuing divestiture opportunities and strengthening our balance sheet.”
He said Teva’s women’s health and European cancer and pain-treatment division are candidates to be divested and would help the company raise $2bn in proceeds, higher than an earlier forecast of $1bn, with other “non-core assets” also under scrutiny.
The company posted revenues of $5.7bn, up 13% on the same period of 2016 thanks to the contribution of Allergan’s unit but around $100m shy of expectations. Generics sales were up 20% to $3.1bn overall, but specialty medicines declined 9% to $2.1bn thanks to continued generic erosion for multiple sclerosis blockbuster Copaxone (glatiramer acetate) which shrank 10% to $1.02bn.
Due to steep share price declines, Teva ended the second quarter with a market valuation below its debt. The company said it intends to pay down $5bn of its $35bn in debt this year, but warned it may be at risk of breaching covenants on that borrowing, specifically that debt be no more than 4.25 times operating profit.
On the firm’s conference call, Teva chairman Sol Barer told analysts that the search for a new CEO still goes on, saying: “this is a process we are not going to rush, and we will not compromise on quality and on finding the best individual possible to lead Teva.”
According to a Financial Times report, both AstraZeneca’s Pascal Soriot and Jacqualyn Fouse, formerly chief operating officer at Celgene, have turned down the job.