Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) plans to spin off its Medis Business, acquired with the purchase of Actavis last year. The divestiture is part of a cost saving strategy that the world’s largest generic drug maker has embarked on after disappointing Q2 Earnings.

Teva Divestitures

The Israeli based drug maker values the Icelandic unit at between $500 million and $1 billion. Founded in 1985, Medis produces generic drugs for human use. The Unit also operates a portfolio of oncology products that is in the early stages of growth.

Reports also indicate that the company is opened to bids for a number of respiratory treatments believed to be worth $500 million and $2 billion. A spin off of Medis and Respiratory products adds to pending disposals of Teva’s women health business and its European oncology assets. The company has also in the past hinted at the possibility of spinning off a number of pain treatments.

Soaring Debt Levels

The selloff comes at a time when Teva is struggling with soaring debt levels that have reached highs of $35 billion. A spin off of non-core assets should allow the company to trim expenditure in addition to getting cash to trim its debt burden. The selloff would also allow the company to preserve its credit.

Teva is fresh from reporting disappointing Q2 result that forced it to cut its full year outlook and slashed its dividend program.

“Teva is looking at every opportunity to focus our business and streamline operations processes and structure. As part of this process, a decision has been made to initiate the potential divestiture of our Medis business,” Teva in a Statement.

Proposed asset sales could be complete before the end of the year. Asset sales could help the company generate at least $2 billion which should exceed initial target of $1 billion. Cost savings should strengthen the company’s credit rating that has plummeted to one level above junk.

Rating firm Moody’s has warned that Teva faces the risk of its credit ratings remaining at an all-time low over the next 12- 18 months given the high debt levels.

Teva was down by 4.32% in Wednesday’s trading session to end the day at $4.32 a share.