Teva Pharmaceuticals (NYSE:TEVA) failed to reverse the negative sentiment that plagues the stock. Although the stock bottomed at $6.34 on Aug. 8, the second-quarter report did not restore investor confidence.
Why not?
In the second quarter, Teva reported a GAAP EPS loss of $0.63 as FCF topped $0.17 billion. Just as Bausch (NYSE:BHC) has a high debt to reduce, Teva does, too. It is on track to achieve a two-year target debt reduction of $3 billion. Net debt stood at $26.6 billion at the end of June with $1.6 billion repaid in July.
Revenue continues to fall steadily but gross margin is mostly stable at 50.5%. Operating margin is also steady at 23.3%. Costs continue to fall with the base spend now at a $6.6 billion for H1 2019 annualized. The 11,150 FTE cut is the biggest driver of cost-cutting.
Investors ultimately must weigh on the growth prospects for Ajovy to justify holding the stock. NBRx share fell steadily throughout 2019. Net sales totaled just $23 million. Austedo revenue growth (at $96 million) was solid in Q2, with 24K prescriptions dispensed, up from ~10K last year. Market share for Copaxone, which faces generic competition, was steady at 17.5% in the U.S.
Your Takeaway
Teva’s turnaround plan will take two to three years to play out. Once net debt/EBITDA falls to below 3x, profit growth will return.
