Teva First-Quarter Profit Slides on Provigil, Generics

Teva Pharmaceutical Industries Ltd.’s first-quarter profit fell 26 percent as a branded drug lost patent protection and opportunities diminished to introduce new generic medicines.

Earnings excluding some costs declined to $960 million, or $1.12 a share, from $1.3 billion, or $1.47, a year earlier, the Petach Tikva, Israel-based company said in a statement today. Profit beat the average estimate of $1.11 a share from 20 analysts surveyed by Bloomberg.

Teva’s branded-drug sales dropped as Provigil, a sleep-disorder medicine it got in the $6.5 billion acquisition of Cephalon Inc. in 2011, lost patent protection last year. Sales of generics were higher in last year’s first quarter as Teva began selling seven new products and benefited from a partnership with Ranbaxy Laboratories Ltd. for copies of Pfizer Inc.’s Lipitor.

Revenue from Copaxone, the branded multiple-sclerosis treatment that is Teva’s best-selling product, increased 17 percent in the quarter to $1.1 billion as the company boosted the price of the injection. Copaxone faces new competition from Biogen Idec Inc.’s Tecfidera, which grabbed an 8 percent share of the MS pill market in the week ended April 19, according to Bloomberg Industries.

Tecfidera Rival

Feedback from doctors suggests some Tecfidera patients are switching from Copaxone, according to Marko Kozul, an analyst with Leerink Swann & Co. Tecfidera was approved for marketing in the U.S. by the Food and Drug Administration in March.

“This is a transitional period as it doesn’t take into account the introduction of Tecfidera, which should begin to impact earnings next quarter,” said Richard Gussow, an analyst at DS Securities & Investments Ltd. in Tel Aviv, who has a buy recommendation on Teva shares. “Lack of major generic launches hurt sales a bit but we expect the pace to pick up in the second half of the year.”

Teva filed for approval of its three-times-weekly version of Copaxone in late March, Michael Hayden, the company’s chief scientific officer, said in a call today. Teva is seeking to switch as many as half of Copaxone patients currently on the daily injection if it gets marketing approval in 2014, he said.

Expected Decline

Chief Executive Officer Jeremy Levin said in November that revenue this year will be between $19.5 billion and $20.5 billion while earnings excluding some costs will be $4.85 to $5.15 a share. With no immediate replacement for the expected decline in Copaxone revenue as competition from oral drugs increases, Levin has pledged to cut as much as $2 billion of costs in the next five years. Levin said today the bulk of the impact from those savings won’t be felt until 2015.

Teva will meet its sales forecast even if a court ruling allows competition to its generic version of Pulmicort Respules treatment for asthma, Chief Financial Officer Eyal Desheh said on the call today. London-based AstraZeneca Plc is seeking through U.S. courts to prevent companies including Actavis Inc., the world’s fourth-biggest maker of generic drugs, from distributing copycat versions of the treatment.

Teva shares fell 1 percent to 135.80 shekels at the close in Tel Aviv, their lowest level since October 2011. The more-actively traded American depositary receipts dropped less than 1 percent to $37.80 at the close in New York. The ADRs have lost 15 percent in the past year including reinvested dividends, compared with a 32 percent return for the Bloomberg Europe Pharmaceutical Index.

Sales dropped 3.9 percent to $4.9 billion, beating the average estimate of $4.86 billion. Revenue from generic drugs in the U.S. fell 27 percent to $895 million. In Europe, generic sales rose 9 percent to $873 million. U.S. generic sales may improve as opportunities increase later this year, Allan Oberman, Teva’s president and chief executive officer in the Americas, said today.

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