After years of business and lawsuit-fueled decline, is a Teva turnaround in sight?
For five years, Teva’s stock tumbled amid a potent cocktail of serious and widespread legal allegations, declining company and industry-wide revenue and debt that creaked more heavily each passing year. Now, their CEO and some investors think they can see the light.
Teva released their quarterly earnings report yesterday, and the stock took a 10% jump, to over $13. That’s still a drop in the bucket compared with the years leading up to 2016, when the stock briefly pushed past $70, but a noticeable bump after a half-decade of almost direct decline.
Those earnings showed Teva’s revenue up to $4.5 billion, a $100 million ahead of expectations, and said they expected strong growth in 2020 from two new drugs: Austedo and Ajovy. In an interview with CNBC, CEO Kåre Schultz said that the company had begun to turn a corner in the shift he was brought on to lead.
“We have done the first part, which was restructuring,” Schultz said. That included closing 12 manufacturing sites and 40 offices and labs, cutting 13,000 employees and saving $3 billion in costs.
In addition to the two new approved drugs, one for Huntington’s and the other for migraine, last year, the company got approval for Truxima, the first US biosimilar to Roche’s Rituxan. Biosimilar uptake in the US has traditionally been low, but Brendan O’Grady, the North American chief, told investors they’ve already achieved 12%-15% market share. The company expects to bring in several hundred million dollars a year.
Teva’s struggles came from a wide range of factors. In the years leading up to 2016, the Israeli generics maker had become a serial dealmaker, even once attempting to purchase one of their biggest competitors in Mylan Pharmaceuticals. It also had significant revenue from one of its first big-branded drugs: Copaxone, a multiple sclerosis treatment that was prescribed to a significant share of MS patients and at its peak earned Teva over $3 billion in a single year.
But a few things began to change around 2016. The company was caught up, alongside Mylan and four smaller companies, in a major antitrust suit in which 20 states attorney general accused them of conspiring to artificially inflate prices. Meanwhile, the cost of generics was falling, a drop Schulz attributed to buyers consolidating and Indian and Chinese companies entering the generics market.
At the same time, the company had growing debt obligations. Its efforts to come up with a replacement for Copaxone before patent expiration failed. Soon, it was also named in the hundreds of lawsuits from states and localities for its role in distributing opioids during the opioid abuse epidemic and for failing to fulfill its legal obligation to halt suspicious orders of controlled substances.
Part of the new investor optimism stems from the fact that Teva has reached a tentative agreement to supply what it calls $23 billion worth of Suboxone. That number, though, is misleading as to what it will actually cost Teva, which one analyst pegged at around $2.3 billion. The deal is not finalized, though, and a similar proposal offered by Purdue Pharma to settle its claims has faced significant pushback.