Shares of Teva Pharmaceutical Industries Ltd. (TEVA) fell 8.09% with the company announcing the departure of its President and Chief Executive Officer (CEO), Dr. Jeremy Levin. Eyal Desheh, Teva's Executive Vice President and Chief Financial Officer, will act as the interim President and CEO until a permanent replacement is found.
Dr. Levin was yet to complete 2 years at Teva at the time of his departure. His departure comes a few days after rumors about disagreements between him and the Board surfaced.
On a conference call, Teva’s Chairman said that although Dr. Levin and the Board were fully aligned on the strategy and direction of the company, there was a difference in views regarding the execution of the strategy.
Teva's Board said it remains committed to its strategy which includes the reduction of assets that are no longer fitting into the core business or are not critical to its future, scaling down of oversized parts of the company while the company will keep focusing on growing its generics business and core R&D programs. Focus areas remain high-value complex generics, expansion in emerging markets and broadening of the specialty medicines and OTC business portfolio.
The company is also seeking to cut costs and expects to reduce year-over-year costs by $1 billion. Earlier this month, Teva had said that it will cut its work force by about 5,000 employees or 10%. A major part of the reduction will be completed by the end of next year.
2013 Outlook Narrowed
Teva narrowed its 2013 outlook and now expects earnings of $4.95 to $5.05 per ADS on revenues of $19.7 billion – $20.3 billion. Earlier, the company was expecting to achieve the mid-point of its guidance range of $4.85 – $5.15 per ADS on total net revenues of $19.5 – $20.5 billion. The Zacks Consensus Estimate for revenues and earnings is currently $20.0 billion and $4.99, respectively.
Teva is going through a transition period. Headwinds include EU pricing pressure, potential new competition for branded products and fewer generic product launches compared to 2012. A major challenge for the company will be for Teva to replace Copaxone (multiple sclerosis) revenues once generics enter the market. With the U.S. Federal Court of Appeals delivering unfavorable rulings regarding the validity of certain Copaxone patents, generic competition could materialize in May 2014, much sooner than expected. Additional competition has entered the multiple sclerosis market in the form of Biogen’s (BIIB) Tecfidera which is off to a strong start.
The sudden departure of Dr. Levin comes on top of the above-mentioned headwinds. At present, concerns remain about finding a new CEO who will be willing to take on the post especially considering the rumors regarding rifts between the previous CEO and the Board.
Teva currently carries a Zacks Rank #3 (Hold). Investor focus will remain on additional commentary regarding the company’s strategy on the third quarter conference call. Guidance for 2014 will be provided in the second week of December.