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Teva Pharmaceuticals (NYSE:TEVA) gave up the $20 level ahead of its earnings report posted on Feb. 13. Despite a $3 billion cut in costs to offset generic drug competition, CEO Kare Schultz has plenty of turnaround work ahead. Investors betting on the recovery could get rewarded.
In the fourth quarter of 2018, Teva reported FCF of $3.7 billion on revenue of $18.9 billion. Costs for the year fell by ~$2.2 billion while debt fell 14%, to $27.1 billion. Copaxone sales are the red flag in the quarter although Teva maintained market share in the U.S. for the year.
Cost Cuts
Cost cutting is not a positive catalyst for companies in general but is a required step for right-sizing the business. Teva will cut $3 billion in spending by year-end 2019. Its restructuring plan already led to a cut of 10,300 FTEs.
Combined with cost cuts and new product sales growth, cash flow growth will continue. Teva grew AJOVY TRx. In 09/21/2018, TRx started at zero. By 01/11/2019, this rose to 6,017. NBRx share rose from 3% to 29% in that same period.
AUSTEDO had 10,500 patients by the end of Q4/2018. Revenue rose from just $1 million in Q2/2017 to a decent $68 million by Q4/2018. The drug generated $204 million in net sales for 2018.
Teva stock will reward value investors who are patient and willing to hold the stock for at least three years.
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