Teva Pharma Beats by a Penny - Analyst Blog
August 01 2011 - 10:50AM
Zacks
Teva Pharmaceutical Industries’ (TEVA) second
quarter earnings of $1.10 per American Depositary Share (ADS) were
a penny above the Zacks Consensus Estimate and 1.9% above the
year-ago earnings.
While second quarter revenues increased 11.1% to $4.2 billion,
revenues fell short of the Zacks Consensus Estimate of $4.3
billion. The company reported sales growth in Europe (82%), EEMA
(22%), Latin America and Asia (15%). However, North America
disappointed with sales declining 15%.
The Quarter in Detail
US generic sales remained weak in the second quarter. Sales in
North America declined 15% to $2,099 million with US generic and
other sales declining 40% to $903 million. The lack of major
launches in the second quarter of 2011 and lower sales of key
products affected performance.
We expect the US generics business to bounce back in the second
half of 2011. Teva has about a dozen launches lined up. Important
product launches include the generic version of Zyprexa. Teva has
partnered with Dr. Reddy’s Laboratories (RDY) for
the exclusive generic launch of Zyprexa in October.
Key branded product Copaxone posted global in-market sales of
$957 million, up 24%. While US in-market sales increased 29% to
$682 million, ex-US in-market sales grew 13% to $275 million. US
sales were driven by price increases and unit growth.
Other products/segments that contributed to growth were Azilect
at $97 million, up 38%, and the women’s health business which
recorded 45% growth with sales coming in at $119 million. The
inclusion of sales of Theramex products helped drive growth in the
women’s health business.
The global respiratory business posted sales of $240 million, up
9%. Performance was driven by strong sales in Europe, especially
for Qvar. Sales in the US, however, declined 3% to $139
million.
Pharmaceutical revenues in Europe increased 82% to $1,478
million. 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
Germany. European sales should continue improving in the coming
quarters.
International (EEMA, Latin America and Asia) pharmaceutical
revenues grew 22% during the quarter with sales coming in at $635
million. Increased sales in Russia and Latin America helped boost
revenues.
API sales increased 12% to $183 million. Currency fluctuations
boosted total revenues by $222 million.
Research & Development expense increased to $243 million
from $217 million in the year-ago period. Meanwhile, Selling and
Marketing (S&M) expenditures increased to $794 million from
$636 million. General and Administrative expenditures also
increased from the year-ago quarter to $284 million.
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. The Zacks Consensus Estimate currently
stands at $5.04 per share. 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.
Earlier in May, 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.
Teva said that it expects third quarter earnings of $1.22 per
share. This was well below expectations.
Neutral on Teva
We currently have a Neutral recommendation on Teva, which
carries a Zacks #3 Rank (short-term “Hold’ rating). We remain
concerned about the intense competition and pricing pressure in the
generics market. However, Teva’s upcoming acquisition of Cephalon
should help the company expand and strengthen its branded and
specialty pharma business.
CEPHALON INC (CEPH): Free Stock Analysis Report
DOCTOR REDDYS (RDY): Free Stock Analysis Report
TEVA PHARM ADR (TEVA): Free Stock Analysis Report
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