Teva Pharmaceutical Industries(NYSE:TEVA) sales and profit are struggling because of pricing pressure, competition, and massive debt, and that's taking a toll on its shares. Can the company get itself back on track? Management recently offered up its outlook for the future and it detailed the progress it's making on its restructuring, so let's look at what Teva is telling investors.

What's happening now

Teva Pharmaceutical's fourth-quarter financials reflect a company that's facing a slate of troublesome headwinds. Revenue tumbled 16% year over year and non-GAAP earnings per share slid 32.6% to $0.93.

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The company blamed its anemic performance on price compression in its generic drug business and a significant decline in sales of its best-selling drug, Copaxone, following the debut of a generic alternative made by Mylan (NASDAQ:MYL) in October.

In Teva Pharmaceutical's generic-drug business, pricing remained a problem last quarter because more buyers are consolidating purchasing power to negotiate lower prices. In terms of Copaxone, Mylan's generic launched at a lower price than Copaxone, which forced Teva Pharmaceutical to increase rebates to slow market share losses. Overall, Copaxone revenue in the U.S. fell 25% and as a result, global Copaxone sales declined 19% to $821 million last quarter.

Since it booked a $150 million payment from Takeda during the same quarter of 2016, its fourth-quarter revenue decline was also due to a tough year-over-year comparison.

In terms of profitability, the company made progress on its restructuring plan, but its efforts weren't enough to offset the negative drag caused by declining sales.

Management expects to have completed about half of its 14,000 job cuts by the end of the second quarter and it's already announced six plant closures. It's also disposed of some non-core products and its eliminated 27% of its pipeline projects following a review of its research and development pipeline.

What's up next?

In 2018, Teva Pharmaceutical expects to realize about half of the $3 billion in savings that are expected from its restructuring plan; however, those savings still won't offset sliding sales for Copaxone and generic pricing pressure. The company's full-year 2018 guidance is for sales of between $18.3 billion and $18.8 billion, down 17.2% year over year, and non-GAAP EPS in the range of between $2.25 and $2.50, which would be a big decline from $4.01 in 2017.

Looking further out, the company has three drugs it hopes will help stabilize its financials: Austedo, fremanezumab, and fasinumab, which it's co-developing with Regeneron Pharmaceuticals.

Austedo was launched last year for tardive dyskinesia and Huntington's disease and in Q4, its sales were $17 million. Management expects revenue to grow, particularly if additional trials in Tourette syndrome succeed and end up increasing its addressable market.

An FDA decision on its migraine drug, fremanezumab, is expected on June 16 and if it's approved, then it could compete against Amgen and Novartis' Aimovig in a market that's expected to grow by 10.3% annually to $8.7 billion in 2026, according to GlobalData. An FDA decision on Aimovig is expected in May, so it is expected to have first-mover advantage. Nevertheless, industry watchers think fremanezumab could be a nine-figure drug someday.

Fasinumab development in osteoarthritis and chronic lower back pain is ongoing and phase 3 trials are approaching the finish line. If trial results are positive, then an FDA filing would follow. The global pain market is worth billions of dollars in sales per year and there's a big need for new pain therapies that can reduce the risk of opioid abuse, so fasinumab could become a top-seller down the road.

In the short term, however, the big challenge for management remains getting its balance sheet in order. Its $40 billion acquisition of Allergan's generic-drug business in 2016 saddled it with a mountain of debt at exactly the wrong time. The good news is Teva Pharmaceutical reduced its debt by $3.3 billion to $32.5 billion in 2017. It also paid down another $1.1 billion after the December quarter closed. The bad news, however, is that it still has over $30 billion in debt on the books, and given sales and profit are expected to fall this year, reducing debt in the future may not be as easy.

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