Teva (TEVA) Stock Rises 5% On Reports Of Massive Job Cuts

According to an Israeli newspaper, Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) is expected to reduce its workforce by about 4000. Consequently, shares of the company were up by more than 5% in the pre-market trading on Nov 20. However, so far this year, the stock has been down 62.8% compared with the industry’s decline of 30.2%.

As per the daily, Teva is also planning to lay off its current president of global research and development and its chief scientific officer, Michael Hayden.

Meanwhile, the company is facing significant challenges in the form of generic competition for Copaxone, new competition for branded products, pricing erosion in the U.S. generics business, lower-than-expected contribution from new generic launches and a massive debt load.

The U.S. generics industry is also confronting significant competitive and pricing pressure, thereby affecting the company’s top-line performance. Also, an increase in FDA generic drug approvals and ongoing customer consolidation are resulting in additional competitive pressure in the industry. The challenges in the U.S. generics market are expected to continue this year and probably in the next as well.

The company’s lead branded drug, Copaxone, is witnessing declining sales for quite some time now. In October 2017, Mylan (NASDAQ:MYL) launched (at-risk) its generic version of the 40 mg formulation much earlier than expected, which was a in a major blow to Teva.

Since 2015, Glatopa — a generic version of Copaxone 20 mg — is already being marketed by Momenta and Novartis’ (NYSE:NVS) generic arm, Sandoz, while Mylan (NASDAQ:MYL) launched its version of the 20 mg formulation in October.

Additionally, the company’s profitability is hurt by a huge debt burden accrued as a result of Teva’s $40.5 billion acquisition of Allergan’s (NYSE:AGN) generic unit, Allergan Generics, in 2016.

In order to combat these challenges, Teva has divested some non-core assets to cut its significant debt load. The rumors of the workforce reduction plan probably cheered investors as it will save costs of the company. It remains to see if these efforts are enough to revive the company’s fortune in this challenging scenario, especially as it faces erosion of its largest product, Copaxone.

Zacks Rank

Teva has a Zacks Rank #5 (Strong Sell).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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