Teva Plunges To 10-Year Low, Credit Rating In Jeopardy

Shares of Teva Pharmaceuticals (NYSE:TEVA) , a favorite for investors chasing large dividend yields, fell more than 4.4%—and hit a 10-year intraday low—on Wednesday. Just says after the company reported sluggish Q2 earnings, investors are continuing to ditch the stock amid reports that Teva is desperately trying to sell off assets.

According to sources cited by Bloomberg, Teva is looking to ramp up asset sales in an effort to preserve its credit rating and cut its mounting debt. The report claims that Medis, an Iceland-based generic drug manufacturer, is one of the Teva units on the table.

Bloomberg also claimed that Teva is considering the sale of its respiratory treatment assets, although the publication’s anonymous sources said that a decision to sell has not been finalized and considerations are still at an early stage.

“Teva is looking at every opportunity to focus our business and streamline operations processes and structure,” the company said in a statement. “Beyond this update, Teva is not in a position to comment on market speculation.”

Teva is under increasing pressure to reduce its debt load, which has swelled to a whopping $35 billion following its acquisition of Allergan’s (NYSE:AGN) generics division. Any new asset sales would come in addition to the pending offloading of Teva’s women’s health and European cancer and pain treatment units.

Just last week, on the same day that the company reported lackluster Q2 earnings, slashed its full-year outlook, and cut its dividend by 75%, Teva CEO Yitzhak Peterburg said that asset sales will likely generate at least $2 billion, well above that $1 billion level that was previously forecasted.

Also last week, Moody’s said that Teva’s debt reduction has been slower than expected and lowered its credit rating. Moody’s hasn’t been the only analyst firm to question Teva recently, as Morgan Stanley’s David Risinger also chimed in this week.

“We believe that Teva’s disappointing generic business performance will take more time to improve given a combination of the generic industry’s intensifying secular challenges and Teva’s own difficulty in executing on its pipeline,” Risinger said in a note.

Risinger downgraded Teva to “underweight” and cut its price target to $16, which would represent a further 8.5% slide from Wednesday’s close.

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