Teva Generic Sales Remain Weak - Analyst Blog
May 12 2011 - 11:57AM
Zacks
Teva Pharmaceutical Industries’ (TEVA) first
quarter earnings of $1.04 per American Depository Share (ADS) were
in-line with the Zacks Consensus Estimate. Earnings, however,
increased 14.3% from the year-ago period.
While first quarter revenues increased 11.7% to $4.1 billion,
revenues fell short of the Zacks Consensus Estimate of $4.3
billion. The company reported sales growth in Europe (66%) and
EEMA, Latin America and Asia (26%). However, North America
disappointed with sales declining 11%.
The Quarter in Detail
US generic sales remained weak in the first quarter. Sales in
North America declined 11% to $2,064 million with US generic and
other sales declining 32% to $952 million. The lack of major
launches in the first quarter of 2011 affected performance.
Moreover, the voluntary suspension of production at the Irvine
plant and the slowdown in the Jerusalem facility due to the receipt
of a warning letter from the US Food and Drug Administration (FDA)
affected generic revenues. Both these factors impacted revenues by
$100 million.
Teva resumed partial production at the Irvine plant in April
2011 with full production expected to resume by year end. The
company also submitted a response to the warning letter for the
Jerusalem facility and has requested the FDA to re-inspect the
facility.
We expect the US generics business to bounce back in the second
half of 2011. Teva has about 40 potential launches lined up for
2011. Important product launches include generic versions of
Zyprexa, Levaquin, Aricept and Nasacort. Approval of generic
Lovenox would be a major boost for the stock.
Key branded product, Copaxone, posted global in-market sales of
$907 million, up 14%. While US in-market sales increased 22% to
$624 million, ex-US in-market sales remained flat at $283 million.
Sales were driven by price increases and unit growth in certain
markets which were partially offset by price cuts in Germany and
other markets. The company reported that Copaxone’s global market
share increased to 31%. Teva took a price increase for Copaxone in
January 2011.
Other products/segments that contributed to growth were Azilect
at $90 million, up 16%, and the women’s health business which
recorded 30% growth with sales coming in at $103 million. The
inclusion of sales of Theramex products helped drive growth in the
women’s health business.
We were pleased to see a 19% increase in sales from the global
respiratory business. Sales came in at $229 million with growth
being driven by strong sales in Europe, especially for Qvar.
Teva is working on strengthening its position in the respiratory
market and expects to file for approval of four new products in
2011, including a May 2011 filing for Qnaze for the treatment of
perennial allergic rhinitis.
Pharmaceutical revenues in Europe increased 66% to $1,344
million, mainly due to strong generic sales in Italy, Spain,
Germany, and France. Results benefited from the inclusion of
ratiopharm’s business. Teva’s acquisition of ratiopharm should help
the company strengthen its position in key European markets,
especially in Germany. European sales should continue improving in
the coming quarters.
International (EEMA, Latin America and Asia) pharmaceutical
revenues grew 26% during the quarter with sales coming in at $672
million. Increased sales in Russia and Latin America helped boost
revenues.
API sales increased 32% to $184 million. Currency fluctuations
boosted total revenues by $27 million.
Research & Development expense increased 15% to $239
million. Meanwhile, Selling and Marketing (S&M) expenditures
(excluding amortization of purchased intangible assets) increased
10.9% to $825 million. General and Administrative expenditures also
increased from the year-ago quarter to $221 million, up 21.4%.
Maintains 2011 Guidance
Teva maintained its guidance for 2011. The company expects
earnings in the range of $4.90 to $5.20 on revenues of $18.5
billion to $19 billion. Performance is expected to be stronger
during the second half of the year. The guidance does not include
the impact of any acquisitions in 2011. The Zacks Consensus
Estimate currently points at earnings of $5.08 on revenues of $18.7
billion.
Earlier this month, Teva announced its intention to acquire
Cephalon, Inc. (CEPH) for $6.8 billion The
Cephalon deal is in-line with Teva’s long-term strategy of
expanding and strengthening its branded and specialty pharma
business. Once the acquisition goes through, the combined company’s
branded product portfolio will consist of more than 20 products
representing sales of about $7 billion.
P&G Deal to Make Teva Leader in Consumer Health
Care
During the first quarter of 2011, Teva entered into a
partnership agreement with Procter & Gamble
(PG) that will target the consumer health care market. The
partnership will bring together both companies' existing
over-the-counter (OTC) medicines and complementary
capabilities.
While P&G will bring its strong brand-building, consumer-led
innovation and go-to-market capabilities to the partnership, Teva's
broad geographic reach, R&D experience, and extensive product
portfolio will be used to drive growth. With this deal, Teva is
looking to become a leader in the consumer health care market.
CEPHALON INC (CEPH): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis Report
TEVA PHARM ADR (TEVA): Free Stock Analysis Report
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