Teva, Mylan Seen to Stay on M&A Sidelines

Teva Pharmaceutical Industries Ltd. (TEVA) and Mylan NV (MYL) will probably stay on the M&A sidelines, according to Oppenheimer & Co. analyst Derek Archila.

"Teva is in no shape to be doing any deals and Mylan is still pretty leveraged," Archila said in an interview.

Teva on Aug. 3 cut its full-year guidance and slashed its dividend 75% owing to weaker U.S. markets and the ongoing political turmoil in Venezuela. Interim president and CEO Dr. Yitzhak Peterburg said in the earnings release that Teva experienced accelerated price erosion and lower volume in its U.S. generics business due to "customer consolidation, greater competition as a result of an increase in generic drug approvals by the U.S. Food and Drug Administration, and some new product launches that were either delayed or subjected to more competition."

Peterburg said the company is focused on "meaningful cost reductions, rationalizing our assets and maximizing their value, actively pursuing divestiture opportunities and strengthening our balance sheet."

On Friday, Fitch Ratings downgraded Teva's issuer default rating to 'BBB-' from 'BBB' with a negative outlook, noting that the company is "facing significant operational stress at a time when it needs to reduce debt and leverage" from its acquisition of Allergan plc's (AGN) generic drug business for $33.4 billion in cash and $5.4 billion in stock. The deal was completed in August 2016.

Teva's American Depository Receipts closed at $23.75, down 24%, on Thursday. They ended Friday's trading session at $20.60, down 13.3%, and were up 0.3% in after-hours trading.

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