Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO Kare Schultz insists that 2019 is a "trough" year for the Israeli drugmaker and that matters will improve next year.
Speaking in the conference call after the company announced its third quarter financial results, he said, "Everything else being equal, unless we don't have a major negative happening, then I still firmly believe that we have the trough year and we'll see a marginal improvement next year in our operating profit."
However, Schultz was the first to admit that a large number of variables could impact Teva's 2020 performance and therefore Teva has declined to issue any guidance for next year.
The variables include fast falling revenue from multiple sclerosis treatment Copaxone, which with its patent now expired, saw US sales fall 41% in the third quarter from $463 million last year to $271 million. But Schultz feels confident that this sharp decline will not continue. He said, "We saw a very stable development both in North America as well as in Europe. So this is of course very positive. We continue to see a slow erosion in the TRx count in North America, and we are optimistic that we will maintain a significant business in Copaxone, both in North America and in Europe."
Schultz added, "We also have things that could happen such as we have the orphan drug designation that Eagle got on Bendeka which is protecting both Bendeka and Treanda from generic competition. And that has been appealed and it has actually - the court proceedings have happened and we are waiting for the outcome of that litigation."
Although Schultz is bullish on Teva's new branded drugs - tardive dyskinesia and Huntington's disease chorea treatment Austedo and migraine treatment Ajovy - combined sales of $130 million in the US in the third quarter means that they are hardly going to replace Copaxone's falling sales any time soon, if ever.
A huge variable concerns litigation against Teva in the US for alleged price fixing and the opioid addiction affair. Schultz had nothing substantial to say on the price fixing litigation but is confident that Teva's reported offer of $23 billion worth of opioid addiction treatment drugs over 10 years will be accepted despite opposition from local government officials.
He said, "I realize that this will only work if everybody comes together. I very much hope that everybody will come together. That was the whole idea behind it. That's what the AGs have been signaling to us. It's a process that's ongoing. I'm sure it's an interesting and dynamic process. But I have high hopes that we will succeed in the end to the best of the American public, but also to the best of everybody involved."
Schultz also played down concerns on Teva's debt, currently estimated at about $27 billion. He said, "Now, when it comes to the ongoing, you could say challenge, we have that we need to secure refinancing in order to serve our debt, and I don't think it's a major issue. I think what matters here is that there is a willingness to look at a longer period here to look at like a 10-year period in order to resolve the issue and that of course means that on a short-term basis given the fact that as we just discussed, we have a high debt and we have a high net debt-to-EBITDA ratio, then the fact that we were looking at a longer-term solution is a positive for our ability to, on an ongoing basis, refinance our debt.
Indeed it was announced on Friday that Teva is raising debt of $1.5 billion in bonds, presumably to lower interest rates on some of its debt, and spread repayments over a longer period.
Teva's third quarter results, raised fourth quarter guidance and Schultz's comments have boosted the company's share price to a four month high.
On Wall Street on Friday, Teva's share price rose 9.80% to $9.30, giving a market cap of $10.758 billion - the highest since July.
Published by Globes, Israel business news - en.globes.co.il - on November 10, 2019
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