Teva beats profit estimates, raises guidance

Kare Schultz Photo: PR

Third quarter non-GAAP earnings per share were $0.68, versus a consensus estimate of $0.54. Teva's share price has risen strongly.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) released its third quarter financials today. The company met he consensus analysts' estimate for revenue, and beat the estimates on profit, and has raised its annual guidance.

Teva posted earnings per share of $0.68 for the third quarter, on revenue of $4.5 billion. The consensus estimate was for non-GAAP earnings of $0.54 per share on revenue of $4.53 million.

Teva now sees earnings per share of $2.80-2.95 for 2018 as a whole, up from its previous 2018 guidance of $2.55-2.80.

Teva's share price is currently up by almost 5% on the Tel Aviv Stock Exchange.

GAAP gross profit was $2,021 million in the third quarter of 2018, a decrease of 24% compared with the third quarter of 2017. GAAP gross profit margin was 44.6% in the third quarter of 2018, compared with 47.2% in the third quarter of 2017.

Non-GAAP gross profit was $2,305 million in the third quarter of 2018, representing a decline of 23% from the third quarter of 2017. Non-GAAP gross profit margin was 50.9% in the third quarter of 2018, compared with 53.1% in the third quarter of 2017. Teva said that the decrease in gross profit margin, on both a GAAP and a non-GAAP basis, resulted primarily from a decline in Copaxone revenue due to generic competition, price erosion in its US generics business, and the loss of revenue following the sale of the company's women’s health business.

GAAP net loss attributable to ordinary shareholders and GAAP diluted loss per share in the third quarter of 2018 were $273 million and $0.27, respectively, compared with a profit of $530 million and $0.52 in the third quarter of 2017. Net non-GAAP adjustments in the third quarter of 2018 were $967 million. The main items accounting for the difference between the loss on a GAAP basis and the profit on a non-GAAP basis were impairment of long-lived assets of $521 million (mainly impairment of intangible assets of product rights and IPR&D assets related to the Actavis Generics acquisition); amortization of purchased intangible assets totaling $297 million, of which $246 million is included in cost of goods sold and the remaining $51 million in S&M expenses; and restructuring expenses of $88 million. 

In the second quarter of this year, Teva recorded revenue of $4.7 billion. Teva ended that quarter with a loss of $241 million, mainly because of provisions arising from the acquisition of Actavis, the generic division of Allergan over two years ago. In that quarter, Teva saw US sales of its blockbuster multiple sclerosis treatment Copaxone dive 46% to $464 million.

Among notable developments in the third quarter were approval to sell a generic version of Mylan's EpiPen, and success in clinical trials for fasinumab which it is developing together with Regeneron for treatment of chronic pain. The most significant news came towards the end of the quarter, when Teva received US Food and Drug Administration (FDA) approval to sell Ajovy (fremanezumab), for treatment of migraine. Investors will expect to hear from Teva's management today about progress in marketing the drug, particularly in comparison with competing drugs that have entered the marketplace.

Teva did not receive cover form one of the biggest insurers in the US, Express Scripts, for its product, whereas competitors Eli Lilly and Amgen did. Progress in marketing of another Teva original drug, Austedo (for the treatment of chorea associated with Huntington's disease) will also be of interest to investors, as will an update on the erosion of sales of Copaxone.

Teva president and CEO Kåre Schultz said on the release of the third quarter results, “I am very satisfied with our progress and we are meeting all our key targets. We received FDA approval for Ajovy in September for the preventive treatment of migraine and we are seeing very good signs of a successful launch. We continue to see strong growth for Austedo, while Copaxone continues to maintain its market share.

"Our restructuring plan has already resulted in a significant cost reduction of $1.8 billion in the first nine months of the year and we are on track to achieve a reduction of $3.0 billion by the end of 2019, while continuing to pay down our debt. Given the solid third quarter results, we have decided to raise our 2018 full year guidance.”

An interesting figure in the financials is R&D expenditure, which totaled $311 million in the third quarter, representing a decrease of 41% compared with the third quarter of 2017. R&D expenses excluding equity compensation expenses and other expenses were $243 million, or 5.4% of quarterly revenue in the third quarter of 2018, compared with $367 million, or 6.5%, in the third quarter of 2017. Teva says that the decrease in R&D expenses resulted primarily from pipeline optimization, phase 3 studies that have ended and related headcount reduction.

Published by Globes, Israel business news - en.globes.co.il - on November 1, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Kare Schultz Photo: PR
Kare Schultz Photo: PR
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