Kare Schultz, the head of the world’s largest generics drug maker, Teva Pharmaceutical Industries Ltd., believes global prices of generics have entered a “more stable situation” after five years in which the total value of the US generic market space witnessed a “dramatic reduction.”
“There has been a dramatic change and we no longer have this spiral price declines, but we have a much more stable situation,” Teva’s CEO said Monday at the 37th Annual J.P. Morgan Healthcare Conference in San Francisco, California.
In December 2017, Teva, Israel’s largest publicly traded company and until recently a source of national pride, said it would slash its workforce by 25% over the next two years and close plants in a bid to reduce massive debt of some $35 billion and to cope with declines in its generics business and sooner-than-expected competition to its flagship branded drug, Copaxone, for multiple sclerosis.
In his speech on Monday, Schultz said the company had managed to stem the price drops in generic drugs by talking with “all of its key customers” in the US about products in which prices had gone below reasonable profitability levels.
“I’m happy to say we are through that process,” he said, according to a printed transcript of his talk. “Of course, we had to give up some of the volume,” but “that didn’t hurt us because we were not making money on it.”
“My guess is that for the second quarter, third quarter, and fourth quarter, the total US generics market will in absolute value be very much stable. And I’m also predicting that to be the case for the future. That does not mean that we get back to where we were. It does not mean that the market goes back to doubling from where it came, but it just means that this constant reduction of the marketplace has stopped, and that’s of course very important for us.”
Declining Copaxone sales
Schultz said that he expects sales of its flagship Copaxone product to “continue to decline next year, as we’ve also been predicting from the very beginning.”
Increased competition for Copaxone — both in the US and in Europe — is “the big challenge” the company has faced, with Teva striving to maintain sales volume and doling out discounts.
That policy “is working well so far,” Schultz said, as the company is managing to hold on to “more than 70% of the business in the US.” Even so, he said, revenue is declining, “because of course …as you give more discounts in order to keep the revenue, then your total sales will of course be declining.”
Teva has also managed to lower its massive debt levels, he said. “We came from $35 billion, and we’ve been doing our best to bring it down. We’re now down to around $27 billion, and we will continue in the coming years to bring it down.”
To date the firm has already cut $1.8 billion in costs via its two-year restructuring plan, which targets a total of $3 billion of cost cuts.
And Teva’s headcount has been “reduced by approximately 10,000 people, which is completely according to the plan as well. Now the plan is not over yet. We are still executing on the plan this year throughout 2019.”
Teva’s bid to cut manufacturing sites from 80 to around 60 in the short term is also “well underway,” and “there will be probably around 10 closures throughout this year,” Schultz said.
Teva’s shares were trading 1.3 percent higher at 2:21 p.m. in Tel Aviv on Tuesday.