Teva Falls as Earnings Fail to Assuage Investor ConcernDavid Wainer
Teva Pharmaceutical Industries Ltd. fell for a fourth day as better-than-estimated earnings failed to assuage concern that the abrupt departure of Chief Executive Officer Jeremy Levin will disrupt the drugmaker’s turnaround.
Teva’s American depositary receipts fell 1.6 percent to $37.09 at the close in New York, bringing the stock’s decline for the week to 11 percent. Third-quarter profit of $1.27 a share beat the average estimate of $1.25 from 19 analysts surveyed by Bloomberg.
Earnings got a boost from higher prices in the U.S. of Teva’s biggest-selling product, the multiple-sclerosis injection Copaxone. Still, the medicine already faces competition from an oral branded drug from Biogen Idec Inc., and low-priced generic copies of Copaxone may reach the market as soon as next year.
“At this point all eyes are on management changes and what that means for the future of the company,” Sabina Podval, an analyst at Leader & Co. in Tel Aviv, said in a phone interview. “The fact that they are so dependent on Copaxone to hit the mark on earnings as the rest of the business struggles makes it scary. What happens the day after the drug goes generic?”
Earnings excluding some costs declined 4 percent to $1.07 billion from $1.1 billion a year earlier, the Petach Tikva, Israel-based company said in a statement today. Sales rose 2 percent to $5.1 billion, beating the average estimate of $4.98 billion. Copaxone revenue climbed 1 percent to $1.05 billion.
Preserving sales of Copaxone now will fall to whoever replaces CEO Jeremy Levin, who left the company because he and the board disagreed on how to restructure the world’s biggest generic-drug maker. Teva may struggle to find a replacement of the same caliber because candidates may be concerned about interference from the board, analysts said.
Biogen boosted its 2013 forecast on Oct. 28 after sales of MS pill Tecfidera, which received U.S. approval in March, topped analysts’ third-quarter estimates. Tecfidera now represents more than 10 percent of the MS market, said Leerink Swann’s Marko Kozul.
With the prospect of a decline in Copaxone sales, Teva is seeking to cut 10 percent of its workforce, or about 5,000 jobs, to trim costs. The labor plan met with uproar in Israel and disagreement between Levin and Chairman Phillip Frost on how to execute the cuts, according to Israel’s Channel 2 television.
Teva’s ADRs began falling Oct. 28 after the report. They slumped 8.1 percent yesterday, the biggest drop in more than two years, after Teva announced Levin’s departure. The ADRs have slumped 42 percent from their peak in 2010 on concern that Copaxone competition would mount, and pressure on the generic-drug business.
Analysts expect sales of Copaxone, which make up about 20 percent of Teva’s revenue and about 50 percent of profit, will fall over the next five years as the relative ease of oral pills lures patients from the older Teva injected product.
Copaxone also faces potential generic competition as early as next year because of a U.S. court decision in July.
Chief Financial Officer Eyal Desheh was named interim CEO while the company searches for Levin’s successor. Desheh is a candidate to get the job permanently, said Amir Elstein, a board member. Erez Vigodman, CEO of chemical company Makhteshim-Agan Industries Ltd. and a Teva board member, probably will get the job, said Ori Hershkovitz, a partner at Sphera Funds Management Ltd. in Tel Aviv.
Teva, in the conference call yesterday announcing Levin’s departure, narrowed its forecast for earnings and sales this year. The company sees profit excluding some costs of $4.95 to $5.05 a share, and sales of $19.7 billion to $20.3 billion. Previously, Teva had forecast $4.85 to $5.15 a share, and revenue of $19.5 billion and $20.5 billion.
Revenue from generic drugs in North America rose 6 percent at constant exchange rates to $1.14 billion. In Europe, generic sales fell 5 percent to $812 million.
Teva had said it expects generic opportunities to grow in the second half as it benefits from branded drugs losing patent protection. The company in September began selling a generic copy of Zemplar, AbbVie Inc.’s capsules to treat secondary hyperparathyroidism, which is caused by low calcium levels. The company also exclusively marketed Adenoscan from Astellas Pharma, a treatment used in combination with a heart procedure.
Faced with looming competition to Copaxone and pressure on the generic business, Levin planned to boost profitability by reducing expenses and developing new branded drugs through small acquisitions and partnerships in areas such as respiratory illnesses and neurology.