The share price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) is falling sharply again after Moody's has revised the Israeli pharmaceuticals company's outlook down to negative from stable. On wall Street, the share price is down 7% to $6.53, giving a market cap of $7.45 billion.
However, Moody's Investors Service has reaffirmed the ratings of Teva and its subsidiaries, including the Ba2 Corporate Family Rating, Ba2-PD Probability of Default Rating, Ba2 senior unsecured ratings, and SGL-3 Speculative Grade Liquidity Rating.
Moody's has heaped more misery on the beleaguered drugmaker by saying that the negative outlook reflects its concern on Teva's, "persistently high leverage and large refinancing needs in light of its rising exposure to opioid-related litigation. It also reflects the minimal cushion in the rating for any negative developments in operating performance that will further delay deleveraging. These include: weak uptake of Teva's new migraine drug, AJOVY; acceleration of erosion of Copaxone; inability to stabilize profitability in the US generics business; or large cash outlays related to litigation."
Moody's continued, "Teva has sizeable debt maturities over the next few years, including more than $2 billion that matures by the end of 2020. Based on Moody's projections for free cash flow, the rating agency believes that Teva has sufficient liquidity to repay 2020 maturities. However, the debt maturities will consume a significant portion of the company's cash and cash flow over the next 18 months. Teva will not generate sufficient cash flow to repay the approximately $4.2 billion of debt that matures in 2021. Failure to refinance these maturities well in advance could further pressure Teva's ratings. Teva's exposure to opioid litigation remains a key uncertainty, posing risk to its ability to refinance at attractive interest rates."
Moody's added, "The potential for litigation payments could delay the company's ability to deleverage by consuming cash that would otherwise be used for debt repayment. The magnitude of potential liabilities are unquantifiable at this stage, and timing is highly uncertain. In the second quarter of 2019, Teva accrued an expense of $646 million. This represents mainly the current provision for the minimum potential for future liabilities for opioid-related cases. This amount will likely grow over time as more information becomes available. There could be a number of opioid litigation developments over the coming months that, if negative for drug manufacturers or distributors, could raise Teva's risk longer-term."
Published by Globes, Israel business news - en.globes.co.il - on August 14, 2019
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