Teva’s Second-Quarter Profit Drops on Fewer New GenericsDavid Wainer
Teva Pharmaceutical Industries Ltd.’s second-quarter profit fell 8.9 percent as the company introduced fewer new generic medicines.
Earnings excluding some costs dropped to $1.02 billion, or $1.20 a share, from $1.1 billion, or $1.28, a year earlier, the Petach Tikva, Israel-based company said in a statement today. The earnings matched the average estimate of 22 analysts surveyed by Bloomberg.
The results underscore the challenge facing Chief Executive Officer Jeremy Levin. Even as generic sales drop, Teva is trying to reduce its dependence on the branded multiple-sclerosis medicine Copaxone, which makes up 22 percent of revenue. The injection faces competition from pills such as Biogen Idec Inc.’s Tecfidera and the threat of generic copies as early as next year.
“While the main business lines such as U.S. and Europe generics declined, Copaxone’s strength picked up the slack,” said Sabina Podval, an analyst at Leader & Co., who estimated Copaxone profit makes up 50 percent to 65 percent of profit. “These results just further demonstrate how reliant Teva is on Copaxone and that’s worrisome.”
The board is supportive of Levin’s strategy of small acquisitions and licensing deals to restore Teva’s drug pipeline, the CEO said in response to a conference-call question by Jami Rubin, a Goldman Sachs Group Inc. analyst. Pressed by Rubin on whether he would consider larger deals that could immediately boost cash flow, Levin said he isn’t looking for short-term fixes, though he wouldn’t rule out any transactions that fit Teva’s strategy.
Rubin cut her recommendation on the stock this week to sell.
Second-quarter sales fell 1.4 percent to $4.92 billion, compared with an average estimate of $4.95 billion. Revenue from generic drugs in North America dropped 8 percent to $970 million, while European generic sales declined 5 percent to $860 million. European pricing pressures and U.S. competition are stifling growth in the generic market, the company said.
Teva’s American depositary receipts declined less than 1 percent to $39.42 at the close in New York. The U.S.-traded stock has returned 7.3 percent this year, including dividends, less than the Bloomberg Europe Pharmaceutical Index’s 15 percent gain. The Tel Aviv-traded shares fell 1.4 percent to 139.20 shekels at the close, the lowest price since June 25.
Last year, Teva’s generic-drug unit benefited from the introduction copies of Pfizer Inc.’s Lipitor cholesterol pill and AstraZeneca Plc’s hypertension treatment Atacand. Teva expects line-up opportunities to increase in the second half of 2013 with 20 to 25 generic products, Allan Oberman, head of Teva’s Americas business, said on the call.
Analysts predict Copaxone sales will fall each of the next five years as new oral medicines lure patients away from the injection. The drug also faces potential generic competition as early as next year after a U.S. court decision last week.
Revenue from Copaxone climbed 9 percent to $1.1 billion in the quarter. Teva raised the price of the injection by 9.9 percent in January. Biogen’s Tecfidera won U.S. approval in March, adding to the competition Copaxone already faced from Novartis AG’s Gilenya pill.
Tecfidera, which gave Biogen $192 million in second-quarter revenue, captured 42 percent of new written prescriptions, according to a Barclays Plc report July 24.
Levin said in November revenue for 2013 will be in a range of $19.5 billion to $20.5 billion while earnings excluding some costs will amount to $4.85 to $5.15 a share.
Results may come in at the lower end of Teva’s forecast if a court ruling allows competition to the company’s generic version of Pulmicort Respules treatment for asthma, said Jonathan Kreizman, an analyst at Clal Finance Batucha Brokerage Ltd.
With no immediate replacement for the expected decline in Copaxone revenue, Levin has pledged to cut as much as $2 billion from costs in the next five years.