Even though Teva Pharmaceuticals (NYSE: TEVA) is performing poorly on the stock market, down over 60% in 2017, it did at least bounce back 26% from yearly lows. The company declared a quarterly dividend and rumors are circulating that Teva will cut 25% of staff. Cost-cutting is a usual first step for companies loaded with debt and in the early phases of turning the company around.
A 25% cut staff located in Israel, along with a 10% reduction for employees at its U.S. operations is painful but necessary. Teva faces declining revenue, extraordinarily high debt of nearly $35 billion, and leadership changes in the near-term.
After failing to protect its patent on Copaxone, Mylan (NASDAQ: MYL) entered quickly in the market to sell a generic version at steeply lower prices. Teva did not expect competition this early and now must forecast lower cash flow available to service debt.
Its CEO hiring may stabilize the management team enough to allow the company to put up non-core assets for sale. But the declining value of biotech companies will limit the premium Teva gets for its businesses.
Takeaway
The nearly one-quarter rebound in the share price could continue. The hiring of Kåre Schultz as CEO should act as a positive catalyst for change at the company.
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