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Teva Clears $3 Billion Buyback, Forecasts Restrained 2012 Growth

A logo is displayed at the entrance to Teva Pharmaceutical Industries Ltd.'s headquarters in Jerusalem. Photographer: Adam Reynolds/Bloomberg
A logo is displayed at the entrance to Teva Pharmaceutical Industries Ltd.'s headquarters in Jerusalem. Photographer: Adam Reynolds/Bloomberg

Teva Pharmaceutical Industries Ltd. forecast lackluster profit growth for next year and said it may buy back as much as $3 billion worth of its own shares to return money to investors.

Earnings excluding some costs will be $5.48 to $5.68 a share in 2012, Chief Executive Officer Shlomo Yanai said on a call with investors today. Analysts at Leerink Swann expected an estimate of $5.55 to $5.85. The world’s largest generic-drug company also indicated it may not meet its long-term target of $31 billion in sales by 2015, which Yanai described as an “aspirational goal.”

Teva, whose American depositary receipts fell as much as 4.9 percent, reported its first decline in quarterly earnings in four years last month. The plan to return money to shareholders suggests Teva will slow the pace of acquisitions after spending $6.5 billion on Cephalon Inc., analysts said.

“They admit they have nothing better to do with the money,” Gilad Alper, an analyst for Excellence Nessuah Brokerage, said via e-mail. “So it’s good in that they pay money to investors rather than buy problematic companies. But it’s an admission of the poor potential in the marketplace.”

Teva’s acquisitions in recent years have included Germany’s Ratiopharm GmbH and Barr Pharmaceuticals Inc. of the U.S. in a strategy to broaden a brand-name portfolio that has been dominated by multiple sclerosis drug Copaxone.

Copaxone’s Peak

Copaxone’s annual sales will probably peak at $3.8 billion, though a generic competitor will take a while to reach the market, Teva executives said on the conference call.

“There may also be some disappointment because perhaps some investors were expecting a dividend increase and that wasn’t delivered,” said Natali Gotlieb, a Tel Aviv-based analyst for Israel Brokerage & Investments Ltd.

The buyback program will probably be completed in three years, the company said in a statement. At current prices, $3 billion would buy about 8 percent of the Petach Tikva, Israel-based drugmaker. The timing of repurchases and amounts spent will depend on the share price and market conditions, Teva said. No shares will be bought before fourth-quarter earnings are published in February, the company said.

“There’s a feeling that there needs to be a change in how the Teva management views their relationship with investors,” Gotlieb said. The buyback plan is therefore “very good news.”

Teva expects revenue of about $22 billion next year, up from an estimated $18.3 billion to $18.6 billion this year.

The company, whose shares have dropped 21 percent this year in U.S. trading, doesn’t plan to make major acquisitions in 2012. It may make smaller purchases, worth as much as “a few hundred million dollars” and form partnerships in emerging markets, according to Yanai.

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