by Natalie Morrison
LONDON, Aug 4 (APM) - Teva will close or sell 15 plants by 2018, exit 45 markets globally, "rationalise" its pipeline, and slash its cash dividend by 75% in response to a disappointing second quarter report, said interim chief executive officer Dr Yitzhak Peterburg.
The company has already reduced its headcount by around 7,000 people since closing the acquisition of Actavis' generics division in August 2016 (APMMA 49026), which is around 2,000 more than it had initially planned, he added.
In March, Teva denied reports it would slash thousands of jobs this year (APMMA 52364).
Peterburg was speaking on the group's second-quarter investor call on Thursday.
During the call, several analysts also quizzed Teva as to whether it will split the business, and whether this is even a realistic option given its $35 billion of debt. The executives neither denied nor confirmed a potential business split, repeatedly responding that they will evaluate what is 'best for shareholders'.
To one such question, Peterburg said: "The only way I can answer it is our board and our management team are committed to acting in the best interest of our shareholders. We evaluate all the time the situation, and I think we are doing the right things now."
During the call, executives repeatedly aired their "disappointment" at the results (APMMA 54186), with second quarter revenues lower than expected at $5.7 billion. The company subsequently lowered full-year 2017 revenue guidance by 5%, with revenues now forecast in the range of $22.8-$23.2 billion, down from a previously expected $23.8-$24.5 billion.
Shares on Thursday closed 18% lower than at the start of the day on the Tel Aviv stock exchange and 24% down on the NYSE.
Executives reiterated issues with U.S. market access and generic competition, as well as the declining business in Venezuela, where deteriorating political issues have "significantly devalued" its currency, Peterburg said.
The projection for 2017 had originally including around $0.11 of earnings generating in Venezuela over the last three quarters of the year, he said, while noting: "we expect to have no contribution from our businesses in Venezuela to earnings in the last two quarters of 2017", according to Seeking Alpha's transcript of the call.
'Decisive actions'
Peterburg added that though he is an interim chief executive officer (CEO), given the current dynamics he has had to take swift, "decisive actions" over difficult "significant business decisions" which will be critical to supporting Teva's business. Action will be taken quickly, both he and Dr Sol Barer, Teva's chairman, said.This will include streamlining the business to reduce the cost base, with closures or divestitures of six facilities in 2017 and nine in 2018, Peterburg said.
"We are also reducing or optimising our geographical footprint in markets where we are significantly subscale. By the end of 2017, we expect to exit 45 markets globally," he said.
Further, the company is reviewing its specialty R&D pipeline with "an experienced outside adviser" in order to "rationalise" it and maximise return on investment, and is continuing with plans to divest its global women's health businesses, as well as oncology and pain businesses in Europe (APMMA 53053).
"We expect to announce agreements in coming months," or at least within the group's original 2017 deadline, Peterburg said, adding that proceeds from the sale of these businesses as well as some additional assets should be at least $2 billion, and will be used primarily for paying down around $5 billion worth of debt. It will also continue to assess non-core activities to sell off in 2018, he noted.
Teva's total debt as of June 30 was $35.1 billion.
Despite unsettled investors, Teva also announced it would cut its cash dividend by 75%, representing around $260 million of cash per quarter, in its drive to pay down debt and invest in its core business.
"It's never easy to take action to reduce the dividend," Barer said. "However, we will continue to make the tough decisions when necessary."
CEO search
On the company's longstanding CEO search, ongoing since Februrary after Erez Vigodman stepped down, Barer insisted Teva will not rush the process."It's been approximately six months, we are looking - this is a global search. We're looking for the right person to lead Teva. I've gone through the qualifications of that person, including significant very senior-level, CEO-level experience at major global pharmaceutical companies," he said.
AstraZeneca CEO Pascal Soriot, who was heavily rumoured to be the next Teva head, was not mentioned in the call. Soriot himself has denied the claims, though only after weeks of speculation (APMMA 54090).
M&A
Despite promises to close facilities, sell off assets and pay down debts, Teva's interim chief financial officer Mike McClellan appeared to refer to potential purchases."In addition, we plan up to $200 million of other asset purchases, mainly in the R&D space."
He added: "Even with a lower cash flow from operations, we are on track for debt repayments of up to $5 billion in 2017 subject to the completion of planned divestments in 2017."
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