Will Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) report growth this year for the first time since 2017? "Globes" asked Eli Kalif, who assumed office as Teva CFO in December. He said, "It depends whether you measure it year-on-year or over a period of the past three or four years. Previously we were at a level of $22-23 billion (annual revenue) and we have fallen to $17 billion - but that has been halted. New products are being introduced on the market and according to forecasts there could be a slight rise in 2020 from 2019 of about $150-200 million. That's a kind of end to the slide."
He added, "If we look at what's been done since 2017 in terms of debt and the expected improvement in gross operational profit in the next four years, we see the wind blowing in the direction of growth and opportunities."
Is the plan to close more factories or just to streamline existing factories?
"It's not just at the level of factories - we look at the processes across the entire organization, supply chain, looking at Teva as one company and not as many companies that were acquired and some of them still managed independently. When the various fields reach optimization and substantial streamlining, it's possible that there could be repercussions for this or that factory, we we are not dealing with such actions at the moment."
Operational profit of 28% by 2023
In 2020, Teva sees revenue of $16.6-17 billion, non-GAAP operational profit of $4-4.4 billion, EBITDA of $4.5-4.9 billion, non-GAAP earnings per share of $2.3-2.55 and free cash flow of $1.8-2.2 billion. Looking at the midrange of the forecasts, there will be a rise in operational profit, net profit EPS but not in revenue, EBITDA and free cash flow.
During the post financial results conference call, Teva presented its targets for the end of 2023 including Non-GAAP operational profit of 28%, and a fall in leverage (debt ratio to EBITDA) under 3. The forecast for 2020 reflects operational profit of 25% in the midrange of the forecast and close to 26% at the upper end of the range, an improvement compared with 24.5% in 2019. This target will be achieved, among other things, by streamlining Teva's production capacity.
Kalif said, "From the end of 2017 until the end of 2019, the company entered ca mode of reorganizing anew in order to halt the loss on turnover due to the expiry of the Copaxone patent. The aim was to stabilize the company so that we could service the debt, on the one hand, and continue production at full capacity on the other hand, while introducing more products on the market and supporting the R&D budget."
He continued, "Now after we have left 23 sites (sold or shut down), there are another 60-65 sites that need optimization. We are changing global operations and from a geographical viewpoint to a technological viewpoint at the level of factory clusters. Viewing technology in order to streamline processes, and optimizing factories for biology, generics and biosimilars. From here we take it to the supply chain. I feel sure about this and know it from the areas that I come from."
Teva's debt stood at $26.9 billion at the end of 2019. In November the company carried out debt recycling by raising a $2.1 billion and now the company estimates that in 2020-2022, it can meet debt repayments with existing liquidity and the free cash flow created. The plan is to carry out mkore debt recycling in the middle of 2022 because in 2023, Teva needs to repay $4.3 billion, and so it would be able to postpone repayment.
One of Teva's important growth engines in the coming years will be migraine treatment Ajovy. In 2019, revenue amounted to a disappointing $96 million and the forecast for 2020 is $250 million. Teva recent launched an auto-injectable version of Ajovy and reported positive results from a clinical trial of the treatment in Japan. Ajovy is also being launched in Europe.
The company's share price rose 9.08% on the NYSE yesterday to $13.45, giving a market cap of $14.67 billion. After a disastrous 2019, the company's share price has risen 32% in 2020 so far.
Published by Globes, Israel business news - en.globes.co.il - on February 13, 2020
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