Teva Pharmaceutical Industries Limited (TEVA) is a pharmaceutical company that manufactures generic drugs and speciality treatments.
At the beginning of November, Fitch Ratings,one of the most well-known credit agencies, downgraded the company’s creditworthiness from BB to BBB,right after the nomination of its new CEO, Kare Schultz. The decision was taken in light of the “significant operational stress” the company has had to deal with while it pays down its debts. Teva also cut its 2017 revenue forecasts for the third time in the face of increasingly aggressive competition, from a forecast of $22.8-23.2 billion to roughly $22.2 billion. Its EPS forecast was also slashed to $3.77 from an expected figure of between $4.30 and $4.50.
The company published a disappointing earnings report on November 2nd, with a small 1% increase in revenue during Q3 2017, compared to Q3 2016, adding just $47 million to reach $5.6 billion. Its net profit, however, reached $530 million during Q3, compared to $348 million for the same period in 2016.
The pharma giant’s main competition is from producers of cheaper generic drugs, which represent more the 50% of its product portfolio. Copaxone, Teva’s flagship drug for multiple sclerosis treatment, is a good example of a product that finds it increasingly difficult to compete effectively with copycats. For example,after 4 of its patents were invalidated by the U.S. courts on the ground of obviousness, Teva stock tumbled 10% in the wake of the decision back in February. Global revenue for Copaxone have since fallen to approximately $1 billion, a 7% decrease compared to Q3 2016.
Many traders and analysts are now quite bearish about the company, which has lost about 70% of its market capitalisation over the past 6 months. It’s hard to know whether Teva stock can recover, even as the new management team prepares to tackle challenges in the U.S. market, handle fiercer competition, implement new strategic plans, and grasp restructuring opportunities that could make the company more profitable.
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