Teva said it was in the process of laying off some 7,000 workers Thursday, as stocks plunged after the drugmaker reported disappointing second-quarter results and cut its dividend payment for the quarter by 75 percent.
The company said it posted a net loss of $6 billion for the quarter, compared to a net income of $188 million in the same period a year earlier. Revenues for the quarter rose 13 percent to $5.7 billion. The shares were trading 18 percent lower at 9:45 a.m. in New York.
The company attributed the poor results to the accelerated price erosion and decreased volumes in its US generics drugs business, mainly due to greater competition as a result of an increase in generic drug approvals by the US Food & Drug Administration and by a continued deterioration of its business environment in Venezuela. These factors also led to a lowering of Teva’s earnings outlook for the remainder of the year, the company said.
“All of us at Teva understand the frustration and disappointment of our shareholders in light of these results,” Yitzhak Peterburg, interim president and CEO of Teva, said in a statement. “Given the current environment, we have had to take swift and decisive actions. We are focused on executing meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet. We will continue to take action to aggressively confront our challenges.”
Closing plants, cutting costs
In a conference call with analysts, Peterburg said the company plans to close six plants in 2017 and nine in 2018, and will pull out of some markets by the end of the year. The company also said it will have cut some 7,000 workers globally by the end of the year. Most of these workers have already been laid off in a process that started in August 2016, with some 1,000 to be laid off by the end of the year.
As of the end of 2016, the company employed 57,000 full-time-equivalent employees, according to the company’s financial statements, with some 7,000 workers in Israel.
The poor results come as the drugmaker is the hunt for a new chief executive officer to stabilize the ship. Erez Vigodman stepped down in February, three years after he took his post in an effort to turn around the fortunes of the company. Vigodman was the architect behind the $40 billion merger with generics drugmaker Actavis Generics, which has turned out to be an expensive deal for the company in light of the drop in prices.
Teva said the second quarter 2017 dividend would be 8.5 cents, down 75% from 34 cents in the first quarter of 2017. It revised its earnings per share forecast for the year to $4.30–$4.50, from a previous outlook of $4.90–$5.30 a share. The revenue outlook for 2017 was also lowered to $22.8–$23.2 billion, from a previously expected range of $23.8–$24.5 billion.
“This adjusted outlook takes into consideration the impact of increased price erosion in our US generics business, which is expected to be in a high single digits rate through the remainder of the year, and delays in generic launches in the US. Lastly, this outlook reflects the continued deterioration of political and economic conditions in Venezuela,” the company said.
The revised guidance ranges assume no generic competition for its flagship multiple sclerosis drug, Copaxone, in the 40 mg dosage in the US in 2017, the company said.
As of June 30, the company’s debt was $35.1 billion.
On Wednesday, a New York Supreme court delivered a further blow to Teva when it ruled against most of its claims against the former owners of a Mexican drug company it acquired in 2015.