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>>> Teva’s latest quarter was even worse than already-low expectations


By Emma Court

Nov 3, 2017


https://www.marketwatch.com/story/tevas-latest-quarter-was-even-worse-than-already-low-expectations-2017-11-02?siteid=bigcharts&dist=bigcharts



The company’s generics business faced even more pressure than before, while it’s also contending with debt and new competition

That Teva Pharmaceutical Industries Ltd.’s latest quarter would likely disappoint could be seen coming from a mile — or rather, a financial quarter — away.

Still, third-quarter results were even worse than expected, coming in below already-reduced expectations and alongside further reductions in Teva’s TEVA, +1.20% 2017 guidance.

Teva shares plummeted 13.7% in extremely heavy Thursday trade, on top of a more than 40% share loss since its second-quarter earnings.

Just like the last quarter, the company’s U.S. generics medication business faced major challenges. Though many of the factors cited were similar to the prior quarter, such as fast Food and Drug Administration approvals of other generic drugs, this time around they had a stronger effect.

In other words, there was “additional pressure on the generics side,” said EvercoreISI analyst Umer Raffat, “and (the) U.S. generic pricing environment worsened,” with year-over-year profit declines comparable to those of other generic drugmakers.

Teva’s profit and revenue both missed expectations. Results included an 8% decline in generic medicines sales and a 27% decline in the segment’s gross profit relative to the year-earlier period.

The drugmaker also cut its profit and revenue outlook for the year, based on an earlier-than-expected launch of a generic to its popular multiple sclerosis medication Copaxone and generic price erosion and volume declines.

The disappointing earnings did not exactly come out of left field: Teva signaled months ago that challenging conditions for its generic drug business would persist, and lowered its guidance for the year, triggering an extended selloff.

Yet while price erosion was around 6% for Teva’s base business in the second quarter, relative to the year-earlier period, in the latest quarter price erosion intensified to 10%, executives said on a Thursday conference call.

Faster Food and Drug Administration approvals of generic drugs, as well as consolidation of its customer base, are two major factors, they said. Both were also cited as affecting price erosion in the second quarter.

Moreover, price erosion is expected to “remain at these elevated levels” for the rest of the year, said Dipankar Bhattacharjee, Teva president and chief executive, Global Generic Medicines Group, according to a FactSet transcript of the company’s earnings call.

See: Teva earnings preview: Facing down cheaper generic prices, generic competition of its own and a lot of debt

The company plans to focus on new product launches and making its base generics business more profitable this year and next, management said.

Teva’s projections for the year were also revised because it expects less revenue from new product launches: about $400 million, compared with previous expectations of $500 million.

That revision came down to a handful of products, including certain slower-than-expected FDA approvals and an unfavorable court decision for a generic Nuvaring, Bhattacharjee said.

But generics pressure isn’t Teva’s sole challenge. The company is also contending with debt, which it won’t be paying down as quickly as planned.

Though it previously announced a $5 billion debt paydown target for this year, the company is now “looking more at a range of $3.5 to $4” billion, due to lower cash flow and other factors, management said.

Copaxone is also facing new competition, including a Mylan MYL, +1.67% generic launched last month.

“Mylan came in with a lower price and net price or higher discount than any analog or other previous experience would suggest,” said Rob Koremans, CEO, Global Specialty Medications, according to the FactSet transcript.

Teva’s new Chief Executive Kare Schultz began at the company on Wednesday, replacing interim CEO Yitzhak Peterburg.

The company plans to release its updated debt plan for 2018 by year-end, management said Thursday, and will be releasing a more extensive plan for its generics business in the coming quarters.

Teva shares have plummeted 53% over the last three months, compared with a 4% rise in the S&P 500 SPX, +0.25%

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