Teva earnings beat estimates, revenue misses

Erez Vigodman Photo: Eyal Yizhar

Teva reported non-GAAP EPS of $1.31 for the third quarter, on revenue of $5.6 billion.

Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) reported its third quarter results today. Revenue in the third quarter of 2016 was $5.6 billion, up 15% compared with the third quarter of 2015. The rise was primarily due to the inclusion of revenues of $887 million of the Actavis generics business, following the closing of the acquisition on August 2. Excluding the impact of foreign exchange fluctuations, revenues increased 19%.

On a GAAP basis, Teva posted a net profit of $412 million, $0.35 per share for the third quarter of 2016. This compares with $103 million, or $0.12 per share, in the third quarter of 2015.

On a non-GAAP basis, net profit attributable to ordinary shareholders in the third quarter of 2016 was $1.4 billion, $1.31 per share, which compares with $1.2 billion, or $1.35 per share, in the third quarter of 2015.

The average analysts' estimate was for earnings per share of $1.28 on revenue of $5.73 billion for the third quarter of 2016.

Global sales of Teva's blockbuster multiple sclerosis treatment Copaxone (20 mg/mL and 40 mg/mL) were $1.1 billion in the third quarter this year, representing a decrease of 2% in comparison with the third quarter of 2015.

Teva declared a cash dividend of $0.34 per ordinary share for the third quarter of 2016, and a cash dividend of $17.50 per Mandatory Convertible Preferred Share for the period.

Teva expects revenue for full year 2016 to be $21.6-$21.9 billion and for the fourth quarter of 2016 to be $6.2-$6.5. Non-GAAP EPS for 2016 is expected to be $5.10-5.20, based on a weighted average number of shares of 1,020 million; non-GAAP EPS for the fourth quarter of 2016 is expected to be $1.34-1.44, based on a weighted average number of shares of 1,077 million.

The current average analysts' estimate is for EPS of $1.42 on revenue of $6.48 billion in the fourth quarter and for EPS of $5.16 on revenue of $22.1 billion for 2016 as a whole. 

Cash flow from operating activities for 2016 is expected to be $4.8-5.0 billion; cash flow from operating activities for the fourth quarter of 2016 is expected to be $1.0-1.2 billion.

Teva's share price is down 3.06% on the Tel Aviv Stock Exchange.

Teva listed $553 million in expenses incurred in settlement agreements, including a $520 million provision for investigations in the US. These investigations involve suspected violations of the US Foreign Corrupt Practices Act (FCPA) in Teva's actions in Mexico, Russia, and Ukraine in 2007-2013. The current financial reports include no write-downs for the acquisition of Rimsa or the current investigation into suspected price fixing by generic drug companies operating in the US.

Concerning possible write-downs in Rimsa and for the antitrust investigation, Teva stated, "As of now, the company sees no reason for an accounting write-down for Rimsa and the antitrust affair. When one emerges, we will fully disclose it."

Teva's generic business in the quarter generated $2.9 billion in revenue, up 32%, compared with the corresponding quarter last year, following the partial consolidation of Actavis during the quarter. Excluding Actavis, however, revenue declined by 26%, similar to the trend among other generic companies, which are being affected by the pressure on generic drug prices on the US. At the same time, Teva's gross profit in the generic sector rose during the quarter.

In the ethical drug sector, revenue fell 6% to $2 billion. The overall loss in revenue resulted from a drop in revenue in almost all of the company's ethical drugs. As mentioned, revenue from Copaxone, the company's leading product, fell 2% to $1.06 billion in the quarter. Revenue also fell sharply for Nuvigil, Treanda, and Bendeka. At the same time, revenue from Azilect and Qvar rose slightly. Teva's profit margin on ethical drugs rose to 87%.

Revenue from Teva's joint venture with Procter & Gamble for marketing over the counter drugs grew 40% to $356 million.

Teva's R&D expenses jumped 84% in the quarter, compared with the corresponding quarter last year, reflecting an increase in the company's investment in innovative activity, compared with recent years. The difference stemmed mainly from a $250 million payment to Regeneron in the framework of its partnership for the fasinumab pain treatment. Teva's R&D expenses in the quarter amounted to 7.3% of revenue, compared with 7.4% in the corresponding period last year.

Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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