Teva Pharmaceutical Industries Ltd.’s (TEVA) earnings next year will miss analyst estimates if regulators allow generic copies of the multiple-sclerosis drug that brings in more than half the company’s annual profit.
Assuming generic competition for Copaxone, earnings excluding some costs will be $4.20 to $4.50 a share, the Petach Tikva, Israel-based company said in a statement today. Analysts predicted $4.92, the average of 21 estimates compiled by Bloomberg.
Teva’s fortune now rests in the hands of the U.S. Food and Drug Administration, which must decide whether to allow generic competition to the blockbuster injection next year. To help ward off a drop in profit, Teva announced in October a plan to cut 10 percent of its workforce. Investors may shy away from Teva as it pairs declining revenue with cost-cutting, said Gilad Alper, a senior analyst at the brokerage unit of Excellence Nessuah Investment House Ltd.
“They’re making a lot of very optimistic assumptions regarding the non-Copaxone business,” Alper, based in Ramat-Gan, Israel, said in a telephone interview. “We have to sit and wait and see if we have generic Copaxone and how many companies launch. It makes a big difference if there’s one or two or three.”
Copaxone may face as many as four generic competitors, Teva said on a conference call with analysts today.
Sales in 2014 will be $19.3 billion to $20.3 billion with generic competition, Teva said. Analysts estimated $19.9 billion, a 1.1 percent decline from the $20.1 billion expected for this year. This year may be the first time revenue will fall in at least two decades, according to analyst estimates.
Each month of delay before competitors can put a generic Copaxone on the market will contribute about $78 million in sales and 8 cents to earnings per share, Teva said.
Teva expects sales of $19.8 billion to $20.8 billion if there’s no generic competition for Copaxone at all next year. That would result in adjusted earnings per share of $4.80 to $5.10.
“2014 will be a pivotal year for Teva and a year of major transitions across the company,” Eyal Desheh, acting president and CEO, said in the statement.
Chief Executive Officer Jeremy Levin stepped down in October after less than 18 months on the job in a dispute with Chairman Phillip Frost.
A U.S. Court of Appeals decided in July to invalidate a 2015 patent protecting Copaxone, paving the way for competitors such as Cambridge, Massachusetts-based Momenta Pharmaceuticals Inc. (MNTA) to lure patients with cheaper copies next year. Teva says the FDA should require lengthy clinical trials not typical for generic medicines, because of the complexity of the molecule in the injection.
The lack of clarity on whether the FDA will approve the generics as Copaxone’s last patent expires in May has created a “binary” event for Teva, Frost told analysts on a conference call in October. Teva doesn’t have a “crystal ball and the ability to predict whether generics will become a real thing in May,” he said at the time.
Teva’s American depositary receipts rose 2.2 percent to $41.03 at 4:03 p.m. in New York. The ADRs returned 14 percent this year including reinvested dividends, compared with a 23 percent return for the Bloomberg EMEA Pharmaceuticals Index. Teva’s Tel Aviv-listed shares rose 4.1 percent to 144.20 shekels.
Copaxone will account for 70 percent of Teva’s profit in 2013, TheMarker said in a Nov. 25 report which Teva called “incomplete.”
Regardless of the outcome, analysts expect sales of Copaxone to fall over the next five years as the relative ease of oral pills lures patients from Teva’s older injected product. At the same time, Teva is facing a slowdown in its own generic-drug business as competition intensifies and fewer blockbuster products lose patent protection.
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