Embattled Teva slashes staff, manufacturing facilities
- Teva Pharmaceutical Industries Ltd. reported lower-than-expected revenues for the second quarter on Thursday, bringing in only $5.7 billion despite the inclusion of the Actavis generics business.
- The company blames the poor performance on continued problems in the generics sector, including pricing erosion, a greater number of generic approvals and decreased volumes.
- "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," said Yitzhak Peterburg, interim president and CEO.
In light of the terrible results, the company is making cuts to staff and manufacturing, as well as commercialization. Peterburg said the Israeli company will have 7,000 fewer staff members by the end of 2017 since closing of the Actavis generics business and will exit 45 markets globally. The company intends to close or divest 15 manufacturing plants by the end of 2018.
Similar to other pharmas across the industry, Teva is also conducting a review of its specialty pipeline in order to prioritize key assets and will review the rest of the business in order to find assets it can divest.
"Although I am only in the interim position of CEO, and due to the market environment, I've had to take decisive action," said Peterburg on the call. "Together with the board and the leadership, we plan to move swiftly. We needed to make significant business decisions that were not easy to make. But are they decisions that are critical in supporting the business into the future," he lamented.
Teva has been aiming for a turnaround for the last several years as its blockbuster multiple sclerosis drug faces increased competition and generic pressure. Yet, a rotating slate of CEOs and continuing missteps has meant that this recent quarter was one of the biggest disappointments yet.
Copaxone (glatiramir acetate) sales continue to decline, dropping to $1 billion for the quarter, down 10%.
Teva has always been a mainstay in the generics space. More than one of its four CEOs in recent years has tried to steer the company back in that direction and away from its specialty drug unit. But this might not be the best choice — the generics sector as a whole has been hit hard by erosion in pricing, increased competition from stepped-up approvals by the Food and Drug Administration. Pressure on the sector might increase further, too, as legislators crack down on controversial pricing practices.
One of the few bright spots for the company is the CGRP inhibitor the company is currently developing for the treatment of migraine. The company recently announced late-stage results and said a filing is on track. The class of drugs is highly anticipated, but also features tight competition. This could be a great market if Teva succeeds, but it will have to beat out the likes of Eli Lilly & Co., Alder Biopharmaceuticals, as well as Amgen and Novartis.
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