CEO Kare Schultz and CFO Michael McClellan have held their first meeting with investors in Israel, in which they gave details of the streamlining plan aimed at tackling the company’s massive $32.5 billion debt, Globes reported on Sunday.
Including in the economizing measures were closure of luxurious and unnecessary offices in New York and the lobbying operation in Washington.
“The basis for the analysts’ conference was obviously management’s guidance for 2018, which includes a substantial drop in revenue, EBITDA, and cash flow over the coming year,” Oppenheimer analysts wrote.
Teva plans to cut $3 billion in annual costs by 2019, to be accomplished through 14,000 layoffs worldwide, along with the termination of 25 ethical drug development programs and over 100 generic drug development programs.
Schultz explained that the five-person lobbying office was superfluous, as Teva in any case belongs to the U.S. Generic Pharmaceutical Association, “and therefore did not need its own lobbyists or offices for them.”
Teva spent nearly $37 million on lobbying over the past 10 years, in which the company’s representatives tried to influence Congress and the White House on such issues as U.S. health laws, tax laws that would affect the company and the government insurance plan.
“We are leaving the investors’ meeting with mixed feelings,” the Oppenheimer analysts wrote.
“On the one hand, it is clear that the company is determined to go ahead with the difficult steps needed in order to cope with the challenges it faces. On the other hand, those same challenges are likely to continue and complicate the company’s activity in the coming years, while at the same time, another failure to meet its targets is liable to make it even more difficult for Teva to service its debt.”
Meanwhile, Teva was sharply criticized for its pricing policy on Syprine, for the treatment of Wilson’s disease, in which copper builds up in the liver, brain and other tissues.
Valeant Pharmaceuticals was charging $21,267 for a bottle of 100 branded Syprine tablets. (Valeant raised the price of the original drug to over $21,000 in 2015. Five years before that, 100 pills of the same product cost $652!)
Then Teva came out with what it touted as a “lower-cost alternative” of the same generic drug, for only $18,275 for 100 pills.
Writing last week about Teva’s pricing policy for its new generic drug, Wells Fargo analyst David Maris wrote, “By and large, generics work when there are multiple players. When there’s not, you get this.” Teva’s only competition has been the original version of Syprine, made by Valeant.
In response to the criticism, Teva spokesperson Kaelan Hollon said: “If there is more competition and ample supply, pricing will continue to fall.”
She would not say, however, how Teva had arrived at its prices, except that the company considers a number of factors.