Teva still looks unhealthy.
S&P Global Ratings on Thursday, Feb. 8, lowered its ratings on Teva Pharmaceutical Industries Ltd. (TEVA) as the drugmaker continues to face challenges including a competitive generic drug market in the U.S.
After the market close, New York-based S&P cut its long-term corporate credit rating on Teva to BB from BBB-. The outlook is stable.
Teva's American depository receipts plunged 10.6% on Thursday after the Petah Tikva, Israel, company reported fourth-quarter results that surpassed analysts' expectations but issued guidance that came in below estimates. On Friday, shares dipped 0.2% to $18.61. Shares are down nearly 46% over the past 12 months and 1.8% in 2018.
In its ratings action, S&P also lowered its issue-level rating on Teva's senior unsecured debt to BB and gave a "3" recovery rating to the debt. The recovery rating "reflects our expectation for meaningful (50%-70%; rounded estimate 50%) recovery in the event of a payment default," S&P said.
A Teva representative did not immediately return a request for comment.
Teva had total debt of $34.7 billion as of Feb. 8, according to FactSet Research Systems Inc. The massive debt load was created largely by Teva's $40.5 billion purchase of Allergan plc's (AGN) generic business in 2016.
Since the acquisition, Teva "has faced a difficult, highly competitive U.S. generic drug market, shortfalls in launching generic drugs, and sooner-than-expected generic competition to its highly profitable multiple sclerosis drug Copaxone," S&P said.
S&P said its stable outlook reflected its expectation for "substantial revenue declines from Copaxone and U.S. generics in 2018, but that cost cutting and more stable U.S. generics results by 2019 will support gradual deleveraging and still-significant free cash flow generation."
Teva said on Dec. 14 it planned to cut 14,000 jobs globally -- or more than a quarter of its staff -- over the next two years as part of restructuring efforts aimed at lowering its total cost base by $3 billion by the end of 2019 from the estimated base of $16.1 billion for 2017.
The company has divested assets as part of of its efforts to raise cash for debt repayment. Among its deals in recent months was the sale of its Paragard intrauterine copper contraceptive to Cooper Cos. (COO) in a $1.1 billion cash transaction.
On Feb. 1, Teva announced amendments to its term loan and revolving credit facilities. The amended leverage ratio covenants in the credit agreements allow for a gradual rise in the leverage ratio from 5 times to 5.9 times in the third quarter and fourth quarter of 2018, gradually declining to 3.5 times by Dec. 31, 2021.
Teva on Thursday reported fourth-quarter non-GAAP earnings per share of 93 cents, compared with $1.38 in the same period in 2016. Revenue was down 16% year-over-year to $5.5 billion. Analysts had forecast, on average, adjusted EPS of 77 cents on revenue of $5.29 billion, according to FactSet.
For full-year 2018, Teva said it anticipated revenue of $18.3 billion to $18.8 billion and non-GAAP earnings per share of $2.25 to $2.50. Analysts had expected revenue of $19.24 billion and adjusted EPS of $2.93.