S&P keeps its negative outlook for Teva
Standard & Poor’s (S&P) has maintained its BBB rating with a negative outlook for Teva Pharmaceutical Industries Ltd., and downgraded its management and governance score.
“Israel-based generic drug maker Teva Pharmaceutical Industries Ltd. continues to face a number of challenges, including threats to its Copaxone [a treatment for multiple sclerosis] business, continued generic pricing pressure, and risks to execution of its strategy as the company navigates changes to its management team,” writes S&P analyst Kim Logan. “We continue to monitor whether the appointment of a new CEO and the concurrent business review bring any change in strategic direction or financial policy.
“The negative outlook reflects our expectations for slower deleveraging than in our previous forecast and risks to our new base case.”
On the management and governance score, Logan writes, “The revision of Teva’s to fair from satisfactory is based on our view that the company’s strategic execution is more challenged given the loss of two key executives in the past three months. The management changes have occurred at the same time the company is striving to integrate the Allergan generics acquisition, achieve 2017 guidance, and manage through legal and regulatory hurdles. The company’s ongoing strategic review also adds a degree of uncertainty to its plans for its generics and specialty businesses.”
Teva CEO Erez Vigodman was ousted in February and temporarily replaced by company chairman Dr. Yitzhak Peterburg, following a long slump in Teva’s share price. In December last year, Sigurdur (Siggi) Olafsson resigned as president and CEO of Teva’s Global Generic Medicines Group, just two-and-a-half years after being appointed to the post. Olafsson master-minded the huge deal in which Teva acquired Actavis, the generic medicines division of Allergan, a deal that has been criticized as too expensive.
Regarding the negative outlook for Teva, Logan writes, “If we gain increased confidence that the company can execute on its deleveraging plan, leading to leverage sustained under 4x, we could revise the outlook back to stable.”