TEL AVIV (Reuters) - Teva Pharmaceutical Industries reported a smaller-than-expected drop in second-quarter profit on Wednesday and said its chief financial officer was leaving the company.
Despite the beat, its shares were down 4% in early trade on the NYSE on concerns over ongoing opioid litigation in the United States and over the pace of paying down its huge debt. It shares have fallen 58% so far in 2019.
Teva had legal settlements and loss contingencies of $646 million in the quarter. These mainly related to an $85 million settlement paid in litigation brought by the Oklahoma attorney general and an estimated provision made for certain other opioid cases they may settle in the future.
The company said the Oklahoma settlement, being the first one, came with a premium.
“For tactical reasons we deemed that it was best to settle there,” Chief Executive Kare Schultz told Reuters. “That does no way mean that we would be interested or willing to settle for the same amount with all the other states.”
He said Teva denies any liability and does not see any misconduct on its part in the opioid cases or in a separate price fixing investigation being carried out by the Department of Justice.
Danish-born Schultz, who joined Teva in November 2017, said he was surprised by the “political nature” of the U.S. opioid crisis and said he would stay at least till the end of his five-year contract.
“I’m not the kind of guy who quits unless the job is done. So of course, I will see it through. If I have to stay longer to see it through I will do it,” he told a conference call.
The world’s largest generic drugmaker earned 60 cents per diluted share excluding one-time items in the April-June quarter, down from 78 cents a year earlier.
Revenue fell 8% to $4.34 billion mainly due to generic competition to its multiple sclerosis drug Copaxone and lower revenues from cholesterol treatment Treanda.
Analysts had forecast Teva would earn 57 cents a share ex-items on revenue of $4.25 billion, according to I/B/E/S data from Refinitiv.
Schultz said Teva was on track to meet its targets of a two-year restructuring plan. “Based on our good results for the first half of the year we are reaffirming our full year guidance,” he said.
Teva has reduced its spending by $2.7 billion since initiating the restructuring last year and said it was on track to cut spending by $3 billion by the end of this year.
Teva’s debt load shrunk to $28.7 billion by the end of June and analysts are concerned over the ability to pay it down.
Its “in-line quarter is likely insufficient to alleviate the key near-term investor concern of leverage and debt paydown against the backdrop of ongoing opioid litigation,” said Citi analyst Liav Abraham.
For 2019, the company had forecast adjusted EPS of $2.20-$2.50 and revenue of $17.0-$17.4 billion. Analysts are forecasting EPS of $2.37 on revenue of $17.14 billion.
Teva said Michael McClellan had decided to step down as CFO due to personal reasons requiring him to be located near his family. Teva has begun a search for a new CFO and McClellan is expected to remain in his role until after the group’s third quarter results.
The announcement McClellan’s departure “is unlikely to ease investors’ concerns regarding the company’s debt paydown strategy,” Abraham said in a note to clients.
In the second quarter, North American sales of migraine drug Ajovy, launched last September, were $23 million, while sales of Huntington’s treatment Austedo more than doubled to $96 million.
The world’s largest generic drugmaker is counting on Ajovy and Austedo to help revive its fortunes after restructuring to tackle a debt crisis.
Schultz said he did not expect that if the United States decides to import generic drugs it would be a threat to Teva’s pricing as U.S. generic drug prices have already fallen sharply.
Additional reporting by Carl O'Donnell and Ari Rabinovitch; Editing by Jane Merriman and David Evans