Teva closes Washington lobbying office

Kare Schultz Photo: PR

Teva spent $5.6 million on lobbying in 2017 and has spent $37 million over the past 10 years.

The new management of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), CEO Kare Schultz and CFO Michael McClellan, last Thursday held their first meeting with investors in Israel. Oppenheimer analysts Nir Hatzav and Avivit Mannet-Kalil published their impressions following the meeting, and wrote that the company's executives had discussed issues of urgent concern to the shareholders, including Teva's streamlining plan, the US generics industry, Copaxone, and of course the company's debt. "The basis for the analysts' conference was obviously management's guidance for 2018, which includes a substantial drop in revenue, EBITDA, and cash flow over the coming year," the Oppenheimer analysts wrote.

Teva plans to cut $3 billion in annual costs by 2019, among other things through 14,000 layoffs worldwide. Openheimer's economists note that Teva will discontinue 25 ethical drug development programs and over 100 generic drug development programs.

"In order to highlight Teva's cost-cutting efforts, Schultz cited a number of measures he had taken as soon as he took up his position," Hatzav and Mannet-Kalik wrote. "Among other things, after taking a nominal part in last November's conference call summing up Teva's third quarter results, which Schultz said was conducted in luxurious offices in New York, he decided that these offices should be closed down, because they did not contribute to Teva's revenue and profits. Schultz also decided to close Teva's offices in Washington, which were used mostly by the company's lobbyists. He said that Teva was already part of the US Generic Pharmaceutical Association, and therefore did not need its own lobbyists or offices for them."

Beyond the money Teva will save by closing down its offices in Washington, the company also expects to save several million dollars a year spent on lobbying. Although the amounts Teva spent on lobbying were never very substantial, at a time of massive cuts, this is one more item on which Teva can save money. A check by "Globes" found that the company had spent nearly $37 million on lobbying over the past 10 years, in which the company's representatives tried to promote issues pertaining to the US health laws, the government insurance plan, etc. Teva sent lobbyists to Congress and the White House.

The biggest spending lobbying was during the past year: Teva spent $5.6 million on lobbying in 2017, 31% more than in 2016. The most recent report sent by Teva to the authorities about its lobbying activity lists the names of five lobbyists employed by the company, headed by SVP public affairs and government policy Debra Barret. These lobbyists promoted Teva's interests in issues pertaining to the US tax reform, the US health law, etc.

"Ruling out a strategic investor and a share offering"

Other matters discussed at the meeting mentioned by Oppenheimer included the company's debt - $32.5 billion as of the end of 2017. Teva's management said that the company did not plan on acquiring any substantial assets during the next five years, and that it intended to refinance its debt for 2019-2021 in the hope that the market conditions would allow this. "From their perspective, the high-yield (junk bond, S.H.-V.) market conditions relevant to them are still reasonable," the analysts write. The company is ruling out bringing in a strategic investor or issuing shares because it believes that such a measure would not be in its shareholders' interests. "We are leaving the investors' meeting with mixed feelings," the Oppenheimer analysts wrote.

"On the one hand, it is clear that the company is determined to go ahead with the difficult steps needed in order to cope with the challenges it faces. On the other hand, those same challenges are likely to continue and complicate the company's activity in the coming years, while at the same time, another failure to meet its targets is liable to make it even more difficult for Teva to service its debt."

Published by Globes [online], Israel Business News - www.globes-online.com - on February 25, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

Kare Schultz Photo: PR
Kare Schultz Photo: PR
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