Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) reported second quarter results that missed analysts’ estimates. In the second quarter, profit, excluding some costs, dropped to $1 billion from $1.23 billion a year earlier. That was lower than the $1.12 billion average of analysts’ estimates compiled by Bloomberg. Sales climbed 12 percent to $5.7 billion.
Interim Chief Financial Officer Michael McClellan said on the earnings call that Teva is “on track” to pay back $5 billion of debt and meet its covenants this year. He also cautioned that it may breach some debt covenants this year if sales don’t rise. Teva now has more debt than its market value. The Israeli company had $33.6 billion in market value and $35.1 billion in debt at the end of the second quarter.
The company is slashing its earnings goals for the second time this year. Earnings per share for the year will probably range from $4.30 a share to $4.50 on sales of $22.8 billion. In January, Teva had estimated earnings of $4.90 to $5.30 this year, with sales ranging from $23.8 billion to $24.5 billion.
The stock slumped the most in almost two decades after the announcement, plummeting 22 percent to $24.45 as of 12:15 p.m in New York. The drop extends the decline in the past 12 months to about 54 percent. Interim CEO Yitzhak Peterburg said, “All of us at Teva understand the frustration and disappointment of our shareholders in light of these results. We will continue to take action to aggressively confront our challenges.”
Peterburg raised his target for cost-reductions this year to $1.6 billion. The company is announcing more job cuts, retreating from 45 markets, and making a steep 75 percent cut to its dividend. Teva also plans to close 6 plants this year and 9 others in 2018. The company will have cut 7,000 jobs by the end of the year, more than the initial estimate of 5,000 positions.
The company has said it plans to divest some assets to help generate at least $2 billion. Those divestments and other asset sales will reportedly include its global women’s health and European cancer and pain-treatment divisions. The sales are likely to be completed by the end of the year.
Peterburg said on the conference call that the company is also continuing to look over other “non-core” operations. He said, “This review will ensure business is much more focused and efficient in the rapidly changing competitive environment.”
The company has been without a permanent CEO for six months after ousting Erez Vigodman in early February. Chairman Sol Barer told analysts that six months isn’t excessive for the search for the new CEO. Barer said, “This is a process we are not going to rush and we will not compromise on quality and on finding the best individual possible to lead Teva.” Teva has had three CEOs in the last five years.