Teva Pharmaceuticals (TEVA) , one of the world's largest drug manufacturers, is still on track to recover from its "trough year" in 2020, according to CEO Kare Schultz.
Shares of the Israel-based pharmaceutical company slipped again on Thursday after the company reported mixed earnings results, stung by disappointing revenue figures as the company's flagship MS drug Copaxone continues to erode amidst generic competition.
"The challenge has been that Copaxone was a real blockbuster," Schultz told Real Money, explaining that as generic competition has picked up, this status has faded.
However, Schultz was quick to point out that his restructuring plan, aimed at delevering the company, should provide a path forward through new drugs like migraine drug Ajovy and Tardive dyskinesia drug Austedo should curtail these losses in the long run.
"We are projected to lose about $3 billion from Copaxone, so we need to take out costs to mitigate that," he explained. "Once we cut costs at that level we can focus on Ajovy and Austedo."
The company has indeed been effective at reducing its debt load in recent years, cutting its indebtedness from $35.8 billion at the start of 2017 to $28.6 billion at the close of the first quarter 2019.
Still, further progress of this cost reduction trend will need to be seen before analysts are ready to call for any inflection point.
"The continued progress with cost reductions should help mitigate some concerns about the company's ability to deliver on that metric as some of the lower hanging fruit may be gone," Credit Suisse analyst Dr. Vamil Divan commented. "Given the significant weakness the stock has seen in the past two months, today's results may be seen as a relief, but overall we do not think they represent a fundamental change in the story as we continue to look for signs of greater top line growth to supplement the expected cost reductions and get us more enthusiastic on the name."
About the roadmap ahead for the company's newest releases, Ajovy and Austedo, analysts were largely encouraged.
"We are very, very happy about the progress of Ajovy, and we do very much look forward to launching this great product, which helps people with chronic migraine in Europe," Schultz told analysts on Thursday morning.
Schultz explained in an interview with RM that the clinical results thus far are also encouraging, leaving the company poised to gain market share from key competitors like Amgen (AMGN) and Eli Lilly (LLY) .
"Ajovy is the first critical breakthrough in chronic migraines in 20 years," Schultz said. "The need is there."
Similarly, he expects Austedo to provide solid results in coming years as Copaxone falls out of favor.
"In Tardive dyskinesia, there's huge unmet need," he explained. "If you look at these TRx accounts per quarter, then you compare it to that Tardive dyskinesia alone, there's probably 500,000 patients in the U.S. suffering from this condition. They have had no real efficacious therapy before, but with this drug, they now have a drug that's indicated for it."
The company now expects about $350 million in revenue from the drug in 2019 as adoption ramps.
"We are completely on track for 2020," Schultz concluded. "The company will be better off next year, maybe not dramatically better off, but better off."
(Amgen is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AMGN? Learn more now.)
