Teva in $26m writedown

Teva, the world’s largest generic drugs company, moved on Thursday to resolve its exposure to the credit crisis with a $26m writedown on impaired assets and a successful bank refinancing of debts to smooth its takeover of Barr of the US.

The Israeli-based group, which posted third-quarter net income up 21 per cent to $637m, reduced its portfolio of auction rate securities, one of the biggest casualties of the credit crunch, from $445m to $261m after writedowns, sales and a groundbreaking $100m compensation settlement with its broker.

It would not disclose the details of the contract or the identity of the brokerage through which Teva had purchased its auction rate securities – long-term debt instruments sold by municipalities and other issuers, whose rates are periodically reset at auctions.

But the settlement, finalised late last month, could set an important precedent for other companies seeking compensation.

Shlomo Yanai, the president and chief executive, said: ”We feel very good. In the global financial crisis, some of our competitors are facing difficulties which will impact on how they play and whether they will survive. Teva has a lot of flexibility.”

He said it was too early to see much impact thus far of the global economic downturn on business but he anticipated that it would help Teva by adding to pressure on governments and other healthcare payers to push for greater use of cheaper generic medicines.

He said the company was on track to complete its acquisition of Barr by the end of this year after renegotiating bank funding for the deal, by which Teva will pay $7.5bn and assume $1.94bn of Barr’s existing debts.

Mr Yanai said his company had secured support on ”modestly increased” terms from nearly all of a syndicate of 40 banks that had lent to Barr and had the option to call in the debts on a change of ownership.

It has also negotiated an additional bridge loan of $1.75bn on terms a little more expensive than originally agreed before the crisis but at less than one per cent above Libor, and will review its renewal or alternative options next year.

Teva’s results were helped not only by sales of generic drugs but also by Copaxone, its multiple sclerosis treatment subject to little competition, which increased 28 per cent to $562m, out of total sales in the quarter of $2.8bn.

The weakness of the dollar reduced operating income by 18 per cent during the period.