Teva Pharmaceutical Industries Ltd.’s (TEVA) sales and profit next year will miss analyst forecasts, the company said today as new Chief Executive Officer Jeremy Levin prepares to lay out his strategy for investors next month.
Revenue will be between $19.5 billion and $20.5 billion, and earnings excluding some costs will be $4.85 to $5.15 a share, the Petach Tikva, Israel-based company said in a statement. Analysts predicted $20.8 billion and $5.63, respectively, based on average estimates compiled by Bloomberg.
Levin, who joined the company in May, said he will announce a wide-reaching strategy update on Dec. 11 in New York. Teva’s shares have underperformed competitors’ this year amid speculation the multiple sclerosis medicine Copaxone may lose market share to new treatments such as Novartis AG’s (NOVN) Gilenya and Biogen Idec Inc. (BIIB)’s not-yet-approved pill BG-12.
“They need to be amazingly smart and lucky to succeed,” said Gilad Alper, a Tel Aviv-based analyst for Excellence Nessuah Brokerage. “The problems are all very well known: the fact that Copaxone at some point over the next several years is going to meet very serious competition, the fact that the U.S. generic market is becoming a lot weaker, not growing as it used to.” Alper rates Teva’s shares a “hold.”
Teva’s American depositary receipts rose less than 1 percent to $40.35 at the close in New York. The ADRs had returned 2.5 percent this year including reinvested dividends, compared with a 15 percent return for the Bloomberg Europe Pharmaceutical Index.
There were “widespread expectations” Teva’s forecast would be below the average analyst estimate, and many analysts were just waiting to see what the forecast would be before cutting their own numbers, said Ronny Gal, an analyst at Sanford C. Bernstein & Co. in New York who has an outperform rating on the stock. The company’s guidance also is conservative because it doesn’t include the effect of planned cost reductions, he said in a report.
Sales of Copaxone, which account for 20 percent of Teva’s revenue, will be $3.7 billion to $3.9 billion, Teva said. Analysts predict $3.74 billion, based on the average of six estimates. Teva previously predicted that sales for the multiple sclerosis drug would peak this year at $3.8 billion.
Teva is taking a “careful approach” to its forecast for Copaxone, Chief Financial Officer Eyal Desheh said on a conference call with analysts today. The numbers will depend on how U.S. regulators view Biogen’s BG-12, Levin told analysts.
Teva also said it will discontinue some research and development programs and push through $1.5 billion to $2 billion in cost cuts that will affect all areas of the business.
“Going forward you will find that Teva looks like a very different company from the Teva of the past,” Levin said.
Teva’s ADRs trade at 7.6 times estimated earnings, the lowest valuation among the world’s 20 biggest drug companies, which have an average price-earnings ratio of 13.8. Investors will realize that Teva’s stock is undervalued as Levin implements a new strategy, Chairman Phillip Frost said in a Nov. 19 interview.
Teva doesn’t want to do multibillion-dollar acquisitions and is “deeply conscious” of the need to build support from shareholders for the company’s transformation, Levin said. “We will have to reward shareholders. We will do that.”
Breaking out sales and profit forecasts into separate business units, as Teva did today, was an effort to make the company more transparent than under previous management, Levin said.
Teva cut its earnings and sales forecasts for 2012 in May, blaming slower economic growth and increased competition in generic drugs. It narrowed the profit forecast to $5.32 to $5.38 a share in November, compared with the May forecast of $5.30 to $5.40. Sales for the year will be between $20.1 billion and $20.7 billion, the company said.
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