Teva Pharmaceutical Industries Ltd.
) recently provided guidance for 2013. The company expects to
earn $4.85 and $5.15 per share on total net sales of $19.5 -
$20.5 billion. Earnings guidance was well below expectations.
While the Zacks Consensus Estimate for earnings, prior to the
release of guidance, was $5.71, the Zacks Consensus Estimate for
revenues was $21 billion.
Teva expects to generate $10.0 - $10.6 billion sales in the US
with the EU and Rest of the World (RoW) generating sales of $5.5
- $6.1 billion and $3.7 - $4.3 billion, respectively.
The major chunk of revenues ($10.3 - $10.7 billion) will be
provided by the generics business. Teva's US generics business is
expected to deliver sales of $4.3 - $4.7 billion. The EU generics
business will remain under pressure with sales expected in the
range of $3.3 - $3.7 billion. RoW generic product sales are
expected to be $2.4 - $2.8 billion.
Meanwhile, branded product sales are expected to decline $300
million to $7.6 - $8.0 billion due to the genericization of
Provigil. Copaxone (multiple sclerosis) sales are also expected
to decline. While Copaxone sales are expected to range from $3.7
to $3.9 billion, oncology product, Treanda is expected to
generate sales of $600 - $700 million. Sleep disorder drug
Nuvigil is expected to generate sales of $280 - $320 million.
While Women's Health products are expected to contribute $460
- $500 million to revenues, ProAir HFA is expected to generate
revenues of $400 - $440 million. QVAR and Azilect are slated to
post revenues of $320 - $360 million and $340 - $380 million,
respectively. Finally, OTC sales are expected to be $0.9 - $1.1
billion. Teva has a partnership agreement with
Procter & Gamble
) targeting the consumer health care market. Other net sales are
expected to be $0.7 - $0.9 billion.
Teva expects to spend 6.6% to 6.7% of net sales on R&D.
Selling & marketing expenses are expected to range between
19.5% and 21.5% of net sales. General and administrative expenses
are expected in the range of 5.8% - 6.2% of net sales.
The company announced a program which is expected to deliver
cost savings of about $1.5 - $2 billion over the next five years.
We note that the impact of this plan is not reflected in the
As far as quarterly performance is concerned, the first
quarter is expected to be relatively soft with performance
improving in the subsequent quarters.
Teva is going through a transition period. The guidance for
2013 was disappointing and we expect significant downward
revisions in earnings and revenue estimates.
Headwinds include EU pricing pressure, potential new
competition for branded products (especially Copaxone) and fewer
generic product launches compared to 2012. With the company not
including the impact of the cost-savings plan in its guidance, we
believe Teva is leaving some room for delivering above
expectations. Share buybacks also leave some room for upside.
Additional details on the cost-savings plan, capital allocation,
and pipeline should be available on the Dec 11 Investor Day.
We currently have a Neutral recommendation on Teva, which
carries a Zacks #3 Rank (Hold). Other generic companies like
) currently carry a Zacks #2 Rank (Buy).
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