Every year in January, US investment house JP Morgan holds a Healthcare Conference that attracts representatives of companies in the sector, analysts, and investors. In the past few years, Teva Pharmaceutical Industries (TASE: TEVA; NYSE: TEVA) has been represented by Kare Schultz, who recently stepped down as CEO of the company. This year, Teva’s representative was CFO Eli Kalif, but Richard Francis, who took over as CEO less than two weeks ago, spoke after him.
Kalif said that Teva had a unique status, and that measures it had carried out in the past five years gave it the ability and the necessary flexibility to grow in the future. He said that Teva was now focused on continued leadership in generic drugs, on accelerating the development of its capabilities in biosimilars, and on unique drugs such as Austedo and Ajovy.
Kalif listed the actions Teva had taken in the past five years, among them optimization of the business, which had reduced its cost base from $16.3 billion in 2017 to $11.5 billion in 2021 (2022’s result shave not yet been released). It will be recalled that under Schultz’s leadership, Teva carried out a massive streamlining program designed to enable the company to service its high debt, which peaked at $35 billion. Kalif said that Teva’s debt now stood at around $19 billion, and that several debt recycling transactions had been carried out in the past few years, with further recycling of some $3.4-4 billion expected this year. He added that he hoped that in the next two years Teva would be able to allocated cash to supporting growth and not just to repaying debt.
On the settlement in the opioids affair, on which further progress was reported this week, Kalif expressed the hope that Teva would be able to put the matter behind it.
Kalif said that Teva would have significant opportunities in both generics and biosimilars in the coming years, and presented data showing loss of exclusivity on drugs worth $188 billion between 2022 and 2026, $70 billion of which was accounted for by biological drugs. He estimated that a biosimilar version of AbbVie’s rheumatoid arthritis treatment Humira that Teva is developing together with Icelandic company Alvotech would be launched in the US this year.
Kalif concluded by saying that Teva was continuing to optimize its business and to reduce debt, and that it expected to return to a path of growth - the company’s revenue has not grown in the past few years.
Shortly before stepping down, the previous CEO Schultz presented Teva’s financial goals for 2027, which included growth in revenue, a non-GAAP operating margin of 30%, a debt:EBITDA ratio of 2, and 80% cash-to-earnings. Asked whether these goals still applied, Schultz’s replacement Francis said, "They still apply."
Asked by JP Morgan analyst Chris Schott what his challenges and priorities were at Teva, Francis replied, "I think the company has done tremendous work to get back on a solid foundation and I think there’s an opportunity to get the company back to growth. We have a world class generics business and I think we’ve got a great pipeline which allows us to think about that business and particularly how we can drive some growth there. But I think that some of the major growth drivers are around biosimilars and around the innovative portfolio. I think there’s a lot of positives. Obviously we have debt, and that gives us some capital constraints… but it’s headed in the right direction."
Asked about what he would bring to Teva from his experience in the industry, Francis said, "What’s interesting is that in the last nineteen years of my career (at Biogen and Sandoz, S. H-V.), my number one competitor has been Teva… so I think I know the company very well." He said that he would be able to leverage his experience in speciality biotech at Biogen with the innovative pipeline, and that the knowledge of generics from Sandoz would help in maximizing the generics and biosimilars business.
Like Kalif, Francis estimated that at some stage the limitations arising from Teva’s debt would diminish and that the company would be able to decide about investment, organic and inorganic. He said that there had been an explosion of science in the industry in the past five years, not just in big pharma, and that this created opportunities for companies to partner with Teva. "For us it’s about finding the right assets, the right partners that we can create long-term relationships with, which historically we’ve been good at," Francis said.
Published by Globes, Israel business news - en.globes.co.il - on January 12, 2023.
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