Teva Pharmaceutical Industries Ltd.
) reported third quarter earnings of $1.27 per American
Depositary Share (ADS), a penny above the Zacks Consensus
Estimate but 0.8% below the year-ago earnings.
Third quarter revenues grew 2% to $5.059 billion, beating the
Zacks Consensus Estimate of $4.996 billion. Revenue growth
reflected higher generic sales in the U.S. and higher global
specialty and OTC sales. This was partially offset by lower
global API sales to third parties.
Quarter in Detail
Teva reported revenue growth in the U.S. (up 4%) and Europe
(up 4%) in the third quarter. Revenues, however, declined in RoW
(down 8%). Currency fluctuations negatively impacted total
revenue by $24 million.
Revenues in the U.S. increased 4% to $2.7 billion in the
reported quarter, mainly due to the generic and specialty
The U.S. generic business posted revenues of $1.1 billion, up
6%. Sales benefited from six new product launches including the
exclusive launches of generic versions of Niaspan ER and Temodar.
Teva also recorded higher sales on its generic versions of
Adderall IR and TriCor.
Going forward, Teva should benefit from a recent court ruling
regarding a patent protecting
) Pulmicort Respules in the U.S. The United States Court of
Appeals for the Federal Circuit upheld a trial court's decision
that the patent is invalid. Based on this ruling, Teva expects to
enjoy another 3-12 months of exclusivity on its generic version
of the product and believes the same could extend through
Specialty product revenues increased 3% to $2.1 billion in the
third quarter of 2013. Higher revenues were attributable to the
performance of Treanda ($184 million, up 15%), Azilect ($93
million, up 21%) and ProAir ($112 million, up 3%). However, this
was partially offset by the negative impact of the genericization
of Provigil which posted revenues of $22 million, down 58% from
the year-ago quarter. Nuvigil ($87 million, down 7%) also
declined during the reported quarter.
Worldwide Copaxone revenues grew merely 1% to $1.05 billion.
While sales in the U.S. grew 3% to $798 million mainly due to
price increases, ex-U.S. sales declined 6% to $254 million. The
decline was mainly due to the timing of tenders in Russia, which
was partially offset by higher sales in Europe. Additional
competition has entered the U.S. market in the form of
Teva is currently seeking FDA approval for a 40 mg
thrice-weekly (3TW - three times a week) formulation of Copaxone;
a response should be out in the first quarter of 2014. With the
U.S. Federal Court of Appeals delivering unfavorable rulings
regarding the validity of certain Copaxone patents (which means
generic competition could materialize sooner than expected), Teva
intends to launch the 3TW formulation aggressively in the first
half of 2014, provided it gains approval.
Meanwhile, respiratory segment revenues grew 10% to $222
million. The women's health business recorded revenues of $126
million, up 31%.
Revenues in Europe grew 4% to $1.4 billion reflecting the
strong performance of specialty medicines.
European generic revenues of $812 million declined 1% from the
year-ago period. The company attributed the decline in revenues
to its strategic focus in this region and lower API revenues.
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 fell
8% during the quarter to $910 million. Unfavorable currency
movement led to the decline in revenues.
API revenues decreased 17% to $162 million. OTC revenues
increased 13% to $286 million.
Research & Development expense increased to $348 million
from $319 million in the year-ago period. Meanwhile, Selling and
Marketing (S&M) expenditures increased to $961 million from
$903 million in the year-ago period.
The company did not purchase any shares during the quarter.
Teva has a $3 billion share buyback program, which was announced
in Dec 2011.
2013 Outlook Narrowed
Earlier this week, Teva had narrowed its 2013 outlook and now
expects earnings of $4.95 to $5.05 per ADS on revenues of $19.7
billion - $20.3 billion. The company was previously expecting to
achieve the mid-point of its guidance range of $4.85 - $5.15 per
ADS on total net revenues of $19.5 - $20.5 billion. The Zacks
Consensus Estimate for revenues and earnings is currently $20.0
billion and $4.99, respectively.
Teva said that it remains committed to its strategy which
includes the reduction of assets that are no longer fitting into
the core business or are not critical to its future, scaling down
of oversized parts of the company while the company will keep
focusing on growing its generics business and core R&D
programs. Focus areas remain high-value complex generics,
expansion in emerging markets and broadening of the specialty
medicines and OTC business portfolio.
The company is also seeking to cut costs and expects to reduce
year-over-year costs by $1 billion. Last month, Teva had said
that it will reduce its workforce by about 5,000 employees or
10%. A major part of the reduction will be completed by the end
of next year.
The company has approved 13 new therapeutic entities (NTEs)
for development so far.
Teva's third quarter results were better-than-expected with
the company beating on both earnings and revenues. As expected,
the U.S. generics business improved this quarter. However, the
company's earnings results were overshadowed by the recent
announcement regarding the departure of the Chief Executive
Currently, concerns remain about finding a new CEO who will be
willing to take on the post especially considering the rumors
regarding rifts between the previous CEO and the Board.
Teva carries a Zacks Rank #3 (Hold). Investor focus will
remain on the search for a new CEO as well as guidance for 2014
which will be provided in the second week of December.
At present, companies that look more attractive include
), a Zacks Rank #2 (Buy) stock.
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