Teva Hit by Increased Competition in U.S. Generics -- 2nd Update

By Denise Roland in London and Rory Jones in Tel Aviv Features Dow Jones Newswires

Teva Pharmaceutical Industries Ltd.'s shares plunged Thursday after the company posted disappointing second-quarter results, cut its full-year outlook and slashed its dividend, blaming the rapid deterioration of its all-important U.S. generic-drug business.

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The bleak update adds to mounting investor concerns about the world's biggest seller of generic drugs, which is grappling with multiple problems without a permanent chief executive after the February departure of Erez Vigodman. Like other generic drugmakers, Teva faces a tough pricing environment and increasing competition that is squeezing its already tight margins. It is also saddled with about $35 billion in debt and a sprawling supply chain accumulated through acquisitions.

Adding to the company's woes, Teva's biggest shareholder said it was dumping its shares. Allergan PLC, which acquired a 9.9% stake in the company when it sold its generics business to Teva for $40 billion in 2016, announced on its own conference call Thursday that it "will not be a long-term shareholder in Teva," adding that it plans to sell its stock over the next few months.

Shares of Teva, whose primary listing is on the Tel Aviv Stock Exchange, were down 18% at 91.50 Israeli shekels on Thursday afternoon. Even after the plunge, the company is Israel's biggest by market capitalization.

Teva said it now expects adjusted earnings per share of $4.30 to $4.50 for 2017, versus earlier guidance of $4.90 to $5.30. It cut its full-year revenue expectations to $22.8 billion-$23.2 billion, from $23.8 billion-$24.5 billion. The company also warned that it expected full-year cash flow of $4.4 billion to $4.6 billion, versus an earlier forecast of $5.7 to $6.1 billion.

Its adjusted EPS for the quarter, at $1.02 and revenue of $5.69 billion, both fell short of analyst expectations of $1.06 and $5.72 billion, respectively. The company also slashed its dividend in the second quarter to 8.5 cents, from 34 cents for the first three months of the year.

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Interim President and CEO Yitzhak Peterburg said he understood "the frustration and disappointment of our shareholders" and promised to "aggressively confront our challenges" by cutting costs, selling off parts of the business and paying down debt.

In June, Teva nominated four new directors in an effort to address investor concerns that its board lacked international pharmaceutical experience. But without a CEO, investors are skeptical of the company's ability to get a turnaround under way.

"It's a rudderless ship until Teva gets a real CEO," said Benny Landa, an activist investor in the firm. "The most important thing is getting leadership on the board and a CEO with global experience."

Mr. Landa and some other shareholders have advocated for the company to be split into different divisions, one focused on generic drugs and the other on specialty medicine. Some investors argue the two businesses should be run by different management or separated entirely.

Teva Chairman Sol Barer said in June that the company was interviewing candidates for the top job, and the choice would likely be someone with global drug-industry experience, from outside Israel but willing to live in the country.

AstraZeneca PLC CEO Pascal Soriot was last month linked to the job, but neither company has commented on what both described as "market rumors."

Write to Denise Roland at Denise.Roland@wsj.com and Rory Jones at rory.jones@wsj.com

(END) Dow Jones Newswires

August 03, 2017 12:48 ET (16:48 GMT)