The Teva divestment rumors are true. The company plans to shop its women’s health and European oncology and pain businesses to potential buyers, hoping to snag some cash to pay down its debt, management confirmed Thursday.
As interim CEO Yitzhak Peterburg told investors on the company’s first-quarter conference call, Teva expects the sale processes to “commence in the coming weeks,” and the Israeli drugmaker thinks it can close out both transactions by the end of the year.
Proceeds from those sales—as well as additional asset sales to come—will be “significantly in excess” of the $1 billion Teva previously predicted, Peterburg forecast.
Reports that Teva was weighing its options for both businesses emerged after Peterburg said Teva would take stock of its assets. The company issued that announcement in February alongside news of then-CEO Erez Vigodman’s departure.
Since then, some analysts have questioned the company’s decision to make strategic moves before landing a new skipper, with RBC Capital Markets’ Randall Stanicky wondering how they would “help recruit a top global executive.”
Fear not, though, said Celgene vet Sol Barer, who stepped into the chairman’s role when Peterburg moved over to interim chief. Peterburg “has the full support of the board to drive forward on Teva’s strategies and key priorities,” Barer said on the call. And in the meantime, he said, the CEO search “is moving along very well,” with the company already having interviewed “a number of excellent candidates from all over the world.”
“We are extremely encouraged by the talent and overall qualifications of the pharmaceutical executives we are meeting with,” Barer said, noting that it will still take some time for Teva to decide on the best “world-class individual.” When it does, though, Teva will “do what it takes” to bring the candidate to the company, Barer promised—even if it means letting him or her out of the company’s previous requirement that a CEO reside in its home country.
CEO isn’t the only C-suite position Teva needs to fill, though. It’s also on the hunt for a new CFO to replace outgoing Eyal Desheh, who will hit the road this summer. Mike McClellan, CFO for Teva’s global specialty medicines division, will be stepping in during the interim, Teva announced on Thursday.
McClellan and his successor will be tasked with paying down debt, which Teva loaded up on when it swallowed Allergan’s generics unit last year for more than $40 billion. While investors haven’t been terribly fond of the move, they did get positive news on the cost-cutting front Thursday, with Teva announcing it now expects to squeeze out $1.5 billion by the end of the year—a $200 million increase over previous guidance.
Unfortunately for Teva’s workforce, though, as the company continues to look for ways to wring out costs, more jobs hang in the balance. Since the Allergan generics deal closed last summer, “we have reduced our headcount by approximately 5,000 people and expect further reductions through the end of 2017,” Peterburg said.
For the first quarter, Teva’s cost-cutting activities factored into a Street-beating profit performance, with the company posting earnings per share of $1.06. That figure topped consensus estimates of $1.03, though its sales haul fell short of estimates; revenue checked in at $5.62 billion, with analysts expecting to see $5.70 billion.
Part of the problem? Superstar multiple sclerosis treatment Copaxone, which came in $15 million behind consensus. “Given the absence of a generic competitor it’s surprising that Copaxone didn’t beat expectations,” Goldman Sachs analyst Jami Rubin wrote to clients.
And investors shouldn’t count too much on generic rollouts this year to make up the gap. In January, the company walked its 2017 expectations down by $1 billion, pointing the finger at unfulfilled generics launches in 2016. And on the call, unit head Dipankar Bhattacharjee promised just $500 million in new knockoff sales for the year.
“In the basket of products that we have, the ones that we have a very high certainty of launching … amounts to $500 million,” he said, when pressed by analysts who recalled a $750 million pledge. “There are a number of opportunities that we continue to look at which have higher risks around legal and regulatory barriers, and our ability to get closer to the number that you’re speaking about is the degree of success we have in overcoming those.”
Meanwhile, Teva did reaffirm its most recent guidance, which outlined sales of between $23.8 billion and $24.5 billion and an EPS range of $4.90 to $5.30. Analysts, though, continue to see those predictions as too high; top- and bottom-line consensus numbers currently stand at $23.7 billion and $4.81, respectively.