When Kåre Schultz became Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CEO in December 2017, he spoke of a "two-year turnaround timeline" and "a clear move upward" in 2020.
2020 is only seven months away and questions are being asked about Teva's prospects for next year. In Teva's financial statement yesterday, Schultz spoke about the success of "our two year restructuring program" and the success of "our long term organic growth drivers." There was no specific comment on 2020.
However, a question about 2020 growth was explicitly asked later at the conference call. Schultz's full answer was less than clear and he actually said that the bigger than expected fall in Copaxone sales this year is good for Teva. He said, "I still expect this year to be the trough here, which basically means that we expect to see better earnings in 2020 than 2019. Whether we will expect to see the revenue, could depend on what happens to, for instance, the Orphan Drug Designation for Bendeka."
So at least profit should be improved, largely as a result of cutting $3 billion in costs. However, the fall in Copaxone revenue has been worse than anticipated but Schultz deemed this beneficial because the multiple sclerosis treatment will "lose less in 2020."
As Schultz explained, "If we look at the earnings and the revenue then you could see if Copaxone comes in lower than we expected for this year, it's actually a benefit for next year, because then there's less to lose. So this is kind of like a negative scenario, moving faster you get out of it in a way each year to get away from it. So in that sense, it's not bad that we hit the earnings and revenue that we are projecting in the first quarter with less Copaxone, that's actually good for us."
So Bendeka aside, where exactly will Teva's growth come from? Schultz said, "This year we expect to hit $150 million for Ajovy and $360 million for Austedo and, of course, substantially more in 2020.
That's very promising but bear in mind that Copaxone sales in North America and Europe fell from $629 million in the first quarter of 2018 to just $322 million in the first quarter of 2019. That's a huge fall but there is still a long way to go. Sales of other branded drugs Treanda, ProAir and Qvark fell from $418 million in the first quarter of 2018 to $245 million in the first quarter of 2019. To make matters worse, sales of generic products in North America fell 11% in the first quarter of 2019 to $966 million from $1.088 billion in the corresponding quarter of 2018 and it remains unclear if the US generics market has bottomed out.
Then there is the question of debt, which has fallen to $26.7 billion and should be down to $25.1 billion by the middle of the year.
These are the reasons that Schultz is so circumspect about commenting on 2020 growth but investors can be encouraged in terms of profit.
Published by Globes, Israel business news - en.globes.co.il - on May 3, 2019
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