Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) announced today that, by the end of 2017, it will have cut 7,000 jobs, and that it will exit from 45 markets and close 15 factories by the end of 2018.
The company's share price is currently down 16.7% on the Tel Aviv Stock Exchange.
This dramatic streamlining plan was announced this afternoon after Teva reported disappointing second quarter results. The Israeli pharmaceutical company reported a GAAP loss of $6 billion ($5.94 per share) and a non-GAAP net profit of $1.02 per share on $5.7 billion in revenue. Market analysts predicted a $1.06 per share profit on $5.72 billion in revenue. Wall Street estimates are that Teva will earn a $4.72 per share net profit in 2017 as a whole on $23.4 billion in revenue.
Teva said, "We have lowered our outlook for 2017 Non-GAAP results to revenues of $22.8 - $23.2 billion, from a previously expected range of $23.8 - $24.5 billion. Non-GAAP EPS for 2017 is now expected to be $4.30 - $4.50, based on a weighted average number of shares of 1,076 million, down from a previously expected range of $4.90 - $5.30."
Despite rumors that a new CEO will be appointed for the company, acting CEO Dr. Yitzhak Peterburg presented the company reports. He said, "Second quarter results were lower than we anticipated due to the performance of our US generics business and the continued deterioration in Venezuela. These factors also led to a lowering of our outlook for the remainder of the year. All of us at Teva understand the frustration and disappointment of our shareholders in light of these results… In our US generics business, we experienced accelerated price erosion and decreased volume mainly due to customer consolidation, greater competition as a result of an increase in generic drug approvals by the US FDA, and some new product launches that were either delayed or subjected to more competition."
Peterburg added, "Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet. We will continue to take action to aggressively confront our challenges."
Teva's research and development expenses totaled $486 million in the second quarter, 30% more than in the second quarter of 2016, mainly due to the inclusion of the R&D expenses of Actavis Generics. Excluding share-based remuneration for employees and acquisition of R&D, R&D expenses totaled $450 million in the second quarter of 2017, 7.9% of revenue, compared with $370 million, 7.3% of revenue in the second quarter of 2016.
R&D for generic drugs amounted to $200 million in the second quarter, up 49%, compared with $134 million in the corresponding quarter of the preceding year, mainly as a result of the consolidation of R&D expenses of Actavis Generics. R&D expenses for specialist medicines increased from $235 million in the second quarter of 2016 to $250 million in the second quarter of this year, a 6% increase, mainly due to development expenses for products in the advanced development stages for treatment of fremanezumab and fasinumab.
One interesting bit of information in the reports is that Teva identified certain unspecified trends in the US generic market that led the company to reassess its business generic unit's policy in the US. Based on an analysis of the unit's adjusted cash flow, Teva has decided to recognize a $6.1 billion reduction in good will relating to its generic business unit in the US in the second quarter of 2017.
Published by Globes [online], Israel Business News - www.globes-online.com - on August 3, 2017
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