Monday, February 26, 2018 8:15:01 PM
Source: Dow Jones News
By Rory Jones
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (February 9, 2018).
Israel's Teva Pharmaceutical Industries Ltd. on Thursday said it took a $17 billion charge against the value of its U.S. generics business and posted a $11.6 billion fourth-quarter loss, capping a tumultuous 2017 that saw a management and boardroom shake-up.
While the world's biggest generic drugmaker has struggled for months, the magnitude of the loss and a warning from Chief Executive Kare Schultz that 2018 could prove just as difficult sent the firm's shares reeling.
Teva said its experimental migraine drug, fremanezumab, may not get approved as early as expected, a setback as the firm had been counting on the drug to boost sales.
Teva's American depositary receipts fell about 10% in New York trading on Thursday.
Teva has been hit hard by declining generics prices in the U.S. and increased competition for its blockbuster multiple-sclerosis drug Copaxone at a time when an acquisition spree saddled the company with debt.
"Starting 2018 we are focused on meeting our financial obligations and ensuring a much more solid and sustainable business model going forward, " Mr. Schultz, who joined the company in November, said in a statement.
Mr. Schultz has quickly attempted to restructure Teva and reassure investors after the firm faced months of declining revenues and a falling share price last year. The chief executive in December said Teva would cut more than 25% of its workforce, or about 14,000 employees around the world, closing factories and research centers to cut costs and pare debt.
The two-year restructuring plan would cut $3 billion in costs by the end of 2019, the company said. Mr. Schultz also has shuffled Teva's leadership ranks and said he would combine its generic and specialty businesses to cut costs.
Investors had called for major changes to Teva's sprawling operations to better cope with the turbulent U.S. generics market and the loss of revenue from Copaxone. One in seven prescriptions in the U.S. is a Teva drug.
But Thursday's poor results and negative outlook indicate Teva has a long road back to recovery. The company said it expects 2018 revenue to be between $18.3 billion and $18.8 billion, below analyst expectations, while non-GAAP earnings per share are expected to be between $2.25 and $2.50.
Teva said it recorded goodwill impairments of $17.1 billion in 2017, mainly related to its U.S. generics unit. In the fourth quarter, the impairment charge was $11 billion.
For the fourth quarter, Teva reported a net loss of $11.6 billion, or a loss of $11.41 a share. In the year-earlier period, the company had a net loss of $1.04 billion. Revenue for the fourth quarter decreased 16% to $5.46 billion.
The company also said that it wouldn't be paying annual bonuses for 2017.
In a sign of the fierce contest in the U.S. market around prices, Mr. Schultz announced that Teva would stop providing pricing commentary so as to avoid a competitive disadvantage.
Teva also said it had outsourced manufacturing of drug fremanezumab's main ingredient to South Korea-based Celltrion Inc., which had received a warning letter from the Food and Drug Administration about manufacturing quality. Analysts said the letter means the drug's approval is probably delayed until the manufacturing issues are resolved.
Umer Raffat, an analyst with Everecore ISI, said the update could allow Teva to better manage investor expectations and offer positive results in the future.
"My takeaway is that Teva [management] is leaving a healthy room in there for surprising to the upside," he said in an analyst note.
(END) Dow Jones Newswires
February 09, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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