In his conference call yesterday, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Kare Schultz discussed the progress of his aggressive streamlining measures to cut costs. He said, "In 2018, we have been closing seven manufacturing facilities and 11 more will be closed or divested in 2019."
He added, "And we also saw a reduction of the net debt by 14%, down to $27.1 billion."
Schultz spoke a lot about Copaxone's "drag," but did not explicitly spell out the numbers. In fact, sales of the multiple sclerosis treatment, now facing generic competition, fell from $3.8 billion in 2017 to just $2.4 billion in 2018 and will fall to just $1.5 billion in 2019 and further in 2020. He also mentioned respiratory inhaler ProAir as a drag, which saw revenue fall from $501 million in 2017 to $397 million last year and will continue falling this year.
On the other hand, Schultz had bullish things to say about Teva's two new specialty drugs - migraine treatment Ajovy and Huntington's disease chorea treatment Austedo. But the actual figures show that these two treatments are far from filling the vacuum left by Copaxone. Ajovy, recently launched in the US, expects sales to reach $150 million in 2019 while Austedo had revenue of $204 million in 2018, which is expected to rise to $350 million in 2019.
On generics, Schultz spoke vaguely about the market stabilizing but did not go into details about the continuing crackdown on generic pricing by the US authorities.
To be fair Schultz stated from the outset that 2018 and 2019 would be difficult years. Exactly a year ago after Teva published its 2017 results, Schultz spoke about a "two-year turnaround timeline" and "a clear move upward" in 2020.
So the fact that Teva's revenue fell 16% in 2018 from 2017 and that non-GAAP net profit fell from $4 billion to $3 billion was no big surprise. Nor was Schultz's description of 2019 as a "trough" year, when revenue will fall another 10% and profit will be eroded by another 25%.
Teva's share price fell 7.79% yesterday on disappointing guidance for 2019. But looking not much further ahead, investors may now be asking where Schultz's 'clear move upward' is going to come from in 2020.
In addition to stressing Ajovy and Austedo he said generally, "We are targeting investments in our pipeline, we are targeting investments in biopharmaceuticals and biosimilars, and we are constantly optimizing our portfolio of both generic and innovative development projects."
The bottom line is that despite sterling work on cutting costs and debt, with no obvious successor to Copaxone and the generics market possibly remaining tough through to next year, Schultz will have his work cut out to make good on his promise of a return to growth in 2020.
Published by Globes, Israel business news - en.globes.co.il - on February 14, 2019
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