Teva Pharmaceutical Industries Ltd.
) finally provided much-awaited guidance for 2012. Teva, which saw
a change in leadership recently, is guiding towards earnings of
$5.30 - $5.40 per share on total net sales of $20 - $21 billion in
2012. This represents a cut from the outlook provided by the
company in late 2011 when it had guided towards earnings of $5.48 -
$5.68 per share on total net sales of about $22 billion.
Performance in the E.U. will continue to be weak throughout the
Teva expects to generate $10.5 billion sales in the U.S. with
the E.U. and Rest of the World (RoW) generating sales of $5.8
billion and $4.2 billion, respectively. The major chunk of revenues
($10.7 billion) will be provided by the generics business
(including API sales).
Teva's U.S. generics business, which had been performing below
expectations for a major part of 2011, is expected to deliver sales
of $4.6 billion in 2012. U.S. generic sales will be impacted by
about $400 million due to strategic and proactive changes in the
commercial model, which will result in a reduction in wholesale
inventories. This amount includes $150 million of delayed product
launches like generic versions of
) Zyprexa (olanzapine) and
) Entecort (budesonide) among others. Moreover, the company has
products that are not launching including generic versions of
) Avandia (rosiglitazone) and
) Lipitor (atorvastatin).
Performance in the E.U. will continue to be affected by
macro-economic conditions, currency fluctuations and healthcare
reforms. While the impact of negative currency movement is
estimated to be $600 million, the ongoing macroeconomic conditions
and healthcare reforms in key European markets are expected to
impact revenues by about $400 million. Teva said that the tough
conditions have resulted in distributors reducing their inventory
levels. The E.U. generics business is expected to deliver revenues
of about $3.4 billion. RoW generic product sales are expected to be
about $2.7 billion.
Meanwhile, branded products are expected to contribute $8.0
billion to the top line with multiple sclerosis drug, Copaxone,
contributing $3.8 billion. Copaxone sales are expected to peak in
2012 and decline through 2015 with the entry of new competitors.
Oncology product, Treanda (a part of Cephalon's portfolio), is
expected to generate sales of $580 million. Sleep disorder drugs,
Provigil and Nuvigil, are expected to generate sales of $420
million and $300 million, respectively.
While Women's Health products are expected to contribute $500
million to revenues, ProAir HFA is expected to generate revenues of
$430 million. QVAR and Azilect are slated to post revenues of $350
million and $340 million, respectively. Finally, OTC sales are
expected to be about $1 billion. Other net sales are also expected
to be about $800 million.
Teva expects to spend between 6.8% to $7.2% of net sales on
R&D. With the Cephalon acquisition, Teva now has 30 late stage
Selling & marketing expenses (including royalties of about
$400 million) are expected to range between 18% and 20% of net
sales. General and administrative expenses are expected in the
range of 5.4% - 6.0% of net sales.
Teva's new guidance for 2012 was well short of expectations with
the Zacks Consensus Estimate standing at $5.58. However, the
guidance cut was largely expected as the new CEO had refrained from
reaffirming the company's previously issued guidance.
We currently have a Neutral recommendation on Teva, which
carries a Zacks #3 Rank (short-term 'Hold' rating).
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