Teva Pharmaceutical Industries Ltd.'s (TEVA) newly appointed CEO, Kare Schultz, brings turnaround experience as the drugmaker faces challenges including generic drug pricing pressure in the U.S. and a substantial debt load.
"We think Mr. Schultz's experience leading financial and restructuring initiatives at global pharmaceutical and healthcare companies could help unlock value for TEVA shares," wrote Cantor Fitzgerald & Co. analyst Louise Chen in a note on Monday, Sept. 11.
Oppenheimer & Co. Inc. analyst Derek Archila wrote that while he views the news positively, Schultz "will be entering the company at a turbulent time, given: (1) continued pricing pressure in US generics; (2) TEVA's meaningful debt and inability to de-lever in a timely manner; and (3) high likelihood of Copaxone 40mg generics in 2018."
Teva had total debt of $35.1 billion as of end-June.
Since 2015, Schultz has been president and CEO of Valby, Denmark-based pharmaceutical firm H. Lundbeck A/S, which he joined as the company was facing the loss of critical patents. He implemented a turnaround strategy that included reducing operating costs while targeting new product launches.
"We believe this experience will be helpful, given TEVA's current state," Archila wrote.
Schultz took the helm of Lundbeck in May 2015. Three months later, the company unveiled a restructuring program aimed at cutting the total cost base by about DKK 3 billion ($480 million) in 2017.
During Schultz's tenure, Lundbeck shares rose from $132.80 to $411.80, which represents an annual return of almost 120%.
In 2016, Lundbeck reported DKK 2.29 billion of earnings before interest and taxes, compared with a loss from operations of DKK 6.82 billion in 2015. The 2015 figure included an impairment loss and restructuring charges of nearly DKK 7 billion while the 2016 figure included an impairment loss of DKK 140 million in connection with drug candidate idalopirdine. Lundbeck's revenue rose 7% year-over-year to DKK 15.63 billion in 2016.
In the first half of 2017, Lundbeck reported Ebit of DKK 2.06 billion, up 117% from the year-ago period. Revenue was DKK 8.49 billion, representing a 13% rise from the first half of 2016.
Before joining Lundbeck, Schultz was at Novo Nordisk A/S for nearly three decades. There, his roles included serving as chief operating officer. His resume also includes stints at McKinsey & Co. and Anderson Consulting.
At Teva, Schultz, 56, will succeed Dr. Yitzhak Peterburg, who has served as interim CEO since February, when Erez Vigodman stepped down following a mutual agreement with the board. Schultz will move to Israel and will be based out of Teva's headquarters in Petah Tikva.
Schultz will join Teva "as soon as practicable," according to a company spokesperson in an email.
News of Schultz's appointment came after 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. Peterburg at the time 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."
Teva in August 2016 completed its purchase of Allergan plc's (AGN) generic drug business for $33.4 billion in cash and $5.4 billion in stock.
Teva's American depository receipts were changing hands at $18.70 on Monday, up 20.7%.
-- Lisa Botter contributed to this article
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