Teva Pharmaceuticals CEO Talks "Trough Year", 2020 Turnaround
Teva Pharmaceuticals is anticipating a trough for 2019, but apropos of the company's name, this is a natural development in the company's restructuring according to CEO Kare Schultz.
The Israel-based generic giant's stock is slumping on Wednesday after a disappointing earnings and soft guidance that missed analyst estimates by a considerable amount.
Schultz did not inspire market confidence with his comments on a conference call with analysts either.
"This is a trough year, as we have been saying since the beginning of the plan," he said.
"This is the year where we bottom out on revenue and operating profit, and in 2020 we expect to return to growth and continue to do so in the coming years based on the launches of the new products." He explained his outlook in an interview with TheStreet's Kevin Curran, noting that the performance hit the company's conservative guidance for the fourth quarter and added that Wall Street was overly bullish in its 2019 targets.
"We'll have the same tough situation this year as we had last year with the loss of revenue from Copaxone that has gone generic," Schultz acknowledged.
"But we do see the growth of new launches which is positive." Schultz added that his comments are not indicative of his feeling on generics overall, which he noted is a market that is stabilizing.
For Teva, Schultz said that finding a balance between the loss of this key multiple sclerosis drug in Copaxone and the launch of Ajovy, a high performing migraine drug, and the development of a non-opioid pain therapy with Regeneron will take time.
As such, he feels the harsh comments on the 2019 outlook are justified.
Copaxone alone saw its revenue decline by 24% year over year after falling to generic status.
The restructuring plan that will progress over 2019 is also focused on driving down the company's debt that will tamp down earnings results in the near term but better position the company for future growth in the long term.
"We are delevering aggressively," he said.
"We have gone from a debt a year and a half ago of $35 billion to $27 billion," he explained.
"Of course, the speed per year depends on the maturities." He extolled the company's plan to continue to draw down debt, taking issue with comments from Moody's that cautioned about the difficulty of this endeavor amidst the loss of Copaxone.
Schultz highlighted that the debt is really an issue of timeline, not on Teva's ability to reduce the overhang.
It is still worth noting that the stock is up over 30%, even with today's tumble, from its December 24 dip alongside numerous stocks, putting the stock slump in perspective.
Schultz put this further into view, hearkening back to his accession to the role at a stock price around $11 in 2017.
"The thing about the trough, I said that already a year ago and that's nothing new," Schultz pointed out.
"The short version is that we're following the plan and the plan will continue to create shareholder value." As the company continues to take its medicine and restructure it will remain a difficult stock for many investors to trust, but if the 2020 turnaround does come about it will be a key story to follow in pharma as the year pushes on.
To hear more as the plan progresses and an opening of hope possibly appears for the Peta Tikvah-based company appears, stick with TheStreet.