Teva Pharmaceutical Industries
) third quarter earnings of $1.28 per American Depositary Share
(ADS) were 3 cents above the Zacks Consensus Estimate and 2%
above the year-ago earnings.
Third quarter revenues increased 14% to $5.00 billion, shy of
the Zacks Consensus Estimate of $5.06 billion.
The Quarter in Detail
Teva reported sales growth in the US (33%) and Europe (1%).
Revenues, however, declined in RoW (3%). Currency fluctuations
negatively impacted total revenues by $202 million.
Sales in the US grew 33% to $2.6 billion in the reported
quarter, boosted by the inclusion of Cephalon and the strong
performance of branded and generic products.
The US generic business continues to show signs of improvement
with sales increasing 24% to $1.1 billion. Sales benefited from
the launch of nine new products and the continued strong
performance of products launched in the first half of 2012. So
far in 2012, Teva has launched 20 new generic products targeting
branded sales of $23 billion. About ten additional generic
product launches are slated for the fourth quarter.
Important launches in the third quarter included the launch of
Teva's generic versions of Takeda's Actos and Actoplus Met.
Branded product revenues increased 38% to $2.0 billion in the
third quarter of 2012. Revenues benefited from the inclusion of
Cephalon products - Treanda ($160 million) and Nuvigil ($94
million). However, Provigil sales ($53 million) declined
significantly due to generic competition. Copaxone sales also
Key branded product Copaxone posted global in-market sales of
$1.05 billion, up 13%. Sales benefited from the take-back of
distribution and marketing rights in Europe from
) and stronger sales in RoW.
Other products that contributed to growth were Azilect at $77
million, up 8%. Meanwhile, respiratory segment sales
declined 4% to $201 million and the women's health business sales
declined 22% to $96 million.
Revenues in Europe increased 1% to $1.4 billion. Although
revenues were positively impacted by the inclusion of Cephalon
products, macro-economic conditions and healthcare reforms in key
European markets continued to impact sales.
Negative currency movement also impacted third quarter 2012
sales. European generic revenues of $798 million declined 13%
from the year-ago period. Teva is working on improving its
diversity, reach and flexibility in Europe.
RoW (Rest of the World including Canada, Israel, certain
markets in Eastern Europe, Latin America and Asia) revenues
slipped 11% during the quarter with sales coming in at $620
million. Although performance was strong in Israel, Russia, and
other Eastern European markets, Canada recorded a decline in
generics sales. Performance was also impacted by
government-imposed price reforms and a slight decline in market
API sales increased 4% to $195 million. OTC revenues increased
38% to $252 million. Teva has a partnership agreement with
Procter & Gamble
) targeting the consumer health care market.
Research & Development expense increased to $319 million
from $227 million in the year-ago period. The inclusion of
Cephalon was the main reason for the increase. The company said
that it expects R&D expenses to increase in the fourth
Meanwhile, Selling and Marketing (S&M) expenditures
increased to $903 million from $796 million mainly due to the
inclusion of Cephalon and the take-back of Copaxone rights in
The company did not buy back any shares during the quarter.
Teva has a $3 billion share buyback program which was announced
in December 2011. We are positive on the company returning value
Tightens 2012 Outlook
Teva now expects earnings of $5.32 - $5.38 per ADS on total
net sales of $20.1 - $20.7 billion in 2012. Earlier, the company
was expecting earnings of $5.30 - $5.40 per ADS on total net
sales of $20 - $21 billion in 2012. The Zacks Consensus Estimate
currently stands at $5.36 per share on revenues of $20.5
Neutral on Teva
We currently have a Neutral recommendation on Teva, which
carries a Zacks #3 Rank (short-term 'Hold' rating). We expect EU
sales to remain weak through the remainder of the year. Longer
term, the Cephalon acquisition should help Teva expand and
strengthen its branded and specialty pharma business. Moreover,
the favorable Copaxone ruling is a major win for the company and
should do away with any concerns regarding near-term generic
competition for the product. We expect investor focus to remain
on the upcoming Investor Day on December 11 when more information
regarding the pipeline will be provided. The company is also
planning to provide its outlook for 2013.
PROCTER & GAMBL (PG): Free Stock Analysis
SANOFI-AVENTIS (SNY): Free Stock Analysis
TEVA PHARM ADR (TEVA): Free Stock Analysis
To read this article on Zacks.com click here.