"We believe that we are on safe ground with respect to our debt," Tomer Amitai, responsible for investor relations at Teva Israel, told an Oppenheimer conference in Tel Aviv today. Teva's debt totaled $30.8 billion at the end of the first quarter, and its net debt was less than $30 billion. Most of the debt was incurred in 2016 to pay for Teva's acquisition of Actavis.
Amitai added, "The strong cash flow in the first quarter and the bond issue we carried out have reduced our net debt to less than $30 billion, and we have continued to reduce it since the quarter ended. The general picture is good. The debt issue changed our repayment schedule and adapted it to our projected cash flow profile, so we are on safe ground."
Amitai was referring to Teva's cost-cutting plan, which he said was designed to reduce Teva's cost base by $3 billion.
"The company's streamlining plan is proceeding at a satisfactory rate beyond expectations. Reduction of Teva's staff, in which 6,200 employees have left the company, is not an easy process, but it is necessary, given the company's dire straits. We are addressing the entire array of our facilities, and of course the deployment of our plants. Since December, we have announced the closure or sale of 10 factories. All in all, we are making good progress."
Amitai was asked in this context about retaining employees and answered, "I openly admit that it has not been easy being a Teva employee in the past two years, and it is certainly not easy when we are undergoing a major painful reorganization process and saying goodbye to colleagues we have worked with for many years. We realize, however, that these measures are necessary in order to stabilize the company and rebuild a new horizon for it. We are stressing all the measures that have been taken and how they are stabilizing the company. I will express myself carefully by saying that in the months since Kare Schultz took the reins, the actions taken have begun to put the company on firmer ground. We are building another company, but a stable one with a positive outlook for the future. We are taking actions to retain our personnel."
Amitai continued, "The generics environment is still changing and challenging, but we are seeing the first signs of a change. Outside the US, the generics environment is relatively positive and stable; in Europe and the rest of the world, business is making good progress. In the US market, the past two years were very tumultuous for the whole industry, but keep in mind that Teva is starting from a leading position in this market. Teva is still the market leader by a wide margin - 15.2% of all prescriptions, with 352 products in the pipeline waiting for approval and 86 products already approved and waiting for launching.
"Our focus is on the interaction with the customers. 90% of our business in the US goes to three customers, and we are in a dialogue with them in order to improve the profit margin of our portfolio, with an emphasis on profit margin, instead of market share, as was the case in the past. The dialogue is fruitful and good. Some of it will result in our exiting products, and some in enhancement of profit margins. The result of the dialogue will be seen during this year and in the coming years, when we will see a more stable environment."
Amitai also said in this context, "When you boil it down, the previous strategy of the entire market, not just Teva, was that a large basket of products provided a competitive edge. This concept has been disproved. Today, coming to a customer with a large portfolio provides no advantage; it is necessary to focus far more on profit margins, and that is what we are doing now. We are going over each product one by one, tens of thousands of product lines, and seeing what no longer meets the profit margins we have set. We are actively choosing to halt production of certain products."
Amitai also commented about Teva's branded products, headed by Copaxone, which has been facing generic competition. He said that Sandoz and Momenta had entered the market in small volumes so far, and despite the competition coming from Mylan, Teva was seeing "nice stability in Copaxone's market share." The company expects a continued decline in Copaxone's performance as a result of the competition.
Teva's recently launched original drug Austedo for movement disorders is available in two forms; first quarter sales amounted to $30 million. "It was a very successful launch - this is one of Teva's more significant products," Amitai said.
As for the migraine drug, Teva anticipates a delay in getting it approved, but still expects approval by the end of the year. Amitai commented, "This is a very promising drug aimed at a huge market that to a great extent has no solution. There is competition that will reach the market at least partially before us - Amgen this month and Eli Lilly about the same time as us, but the market is nevertheless large and will make a significant contribution to Teva's revenue and profits in the coming years."
Published by Globes [online], Israel business news - www.globes-online.com - on May 13, 2018
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