Teva releases financials, shares fall off cliff, plans to axe 7000 jobs
Teva has released its second quarter financials and they do not make for great reading if you’re an investor. The company announced a $6 billion loss, though this can be attributed to a $6.1 billion goodwill impartment charge over its Allergan acquisition.
What will have worried investors more is that adjusted net income fell below market expectations ($1 billion instead of $1.1 billion) and coincided with the release of news that it plans to scale back its global operations due to the difficulties it is facing.
The proportion to which it will curb its worldwide footprint is commensurate to the difficulties it has faced over the past year and a half – with plans to cut back 7,000 roles and to close 15 factories by the end of 2018.
It is a major spring clean for the company and one it would have liked to undertake with a CEO at the helm. However, with the difficulties in finding an adequate replacement, alongside rumours that it missed out on prising Soriot from AstraZeneca, the company does not look any closer to providing itself with new leadership.
The company pinned down geographical reasons for its struggles to boost revenue, citing current conditions in the US market and political instability in Venezuela as particular difficulties.
“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,” stated Dr. Yitzhak Peterburg, Interim President and CEO. “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.”
The release of the financials saw shares in Teva drop by 16% and any talk of falling off cliffs will only cause further worries for investors, as revenues are currently being supported by Copaxone – a product that is due to face serious generic competition.
If Mylan had got its manufacturing game together, the approval of a 40mg competitor could have already arrived – seriously damaging revenue from Teva’s product. This did not stop sales of the drug falling regardless, as 20mg generic competitors eroded sales.
In proof it never rains but it pours, Teva were also hit with the loss of a breach of contract suit against its Rimsa plant in Mexico the same day. A New York judge rejected Teva’s claim of fraud over the $2.3 billion deal yet the company insists it will continue with the lawsuit.
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