2017 outlook weighs on Teva

Erez Vigodman Photo: Eyal Yizhar

Teva's share price fell sharply in New York on Friday after it released 2017 projections below analysts' estimates.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) released guidance for 2017 on Friday, even before publishing its fourth quarter 2016 results. The company said that the move was intended "to enhance investor understanding of the company’s business performance, and to provide more clarity and transparency regarding its projections for 2017."

Teva sees revenue totaling $23.8-24.5 billion in 2017, a gross profit margin of 57-58%, operating profit of $7.4-7.8 billion, and earnings per share of $4.9-5.3. The figures are provided on a non-GAAP basis.

Revenue from the company's generics business is projected at $13.9-14.3 billion, of which 43-45% will be generated in the US, 26-28% in Europe, and 28-30% in the rest of the world. The profitability of the generics segment in 2017is expected to be between 30% and 31%.

Revenue from Teva's blockbuster multiple sclerosis treatment Copaxone is projected at $3.8-3.9 billion in 2017, while revenue from Teva's other specialty drugs is projected to be $4.25-4.65 billion. The company estimates that its Copaxone 40 mg/mL will not face generic competition in the US during 2017, but adds that the entry of two AB-rated generic competitors in the US in February 2017 could reduce revenue by $1.0 billion to $1.2 billion, and could reduce non-GAAP EPS by $0.65 to $0.80.

Teva's share price has fallen 42% in the past year, amid general weakness in the generic drugs sector and fears on the part of investors of intervention by the US government on generic drug prices. The price fell 7.53% in New York on Friday to $35.10, which gives a negative arbitrage gap in comparison with the price in Tel Aviv, so that the share is expected to fall steeply when trading opens on the Tel Aviv Stock Exchange this morning.

On average, analysts covering Teva estimate revenue of $21.7 billion and earnings per share of $5.13 for 2016, and revenue of $24.8 billion and earnings per share of $5.44 for 2017. The outlook published on Friday is thus a little below the average analysts' estimate.

Teva president and CEO Erez Vigodman said, “2016 was a transition year for Teva. The entire healthcare sector has faced significant headwinds, and we have not been immune.

“Looking ahead to 2017, we are focused on execution. We know what our key priorities are, and we are determined to deliver on them. We are focused on extracting synergies related to the Actavis Generics transaction, driving additional efficiencies throughout the organization, cash generation and paying down our debt, delivering on the promise of the specialty pipeline and executing key generic launches. We continue to make excellent progress on the integration of Actavis Generics and our promise of $1.4 billion in net deal-related synergies and tax savings by 2019. Our broad generic pipeline from the combined business provides a robust pool of new product opportunities in 2017. In specialty, we continue to bolster the pipeline through investments in our organic R&D program targeted to our key therapeutic areas. We will continue to build on our strong foundation as we move into 2017 and beyond.”

Published by Globes [online], Israel business news - www.globes-online.com - on January 8, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

Erez Vigodman Photo: Eyal Yizhar
Erez Vigodman Photo: Eyal Yizhar
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