Investors Sell Teva after Profit Surge

The drug maker reported sharply higher earnings after its IVAX acquisition, but analysts fretted over the stock's valuation

Teva Pharmaceutical Industries (TEVA) on Nov. 7 announced surging income during the third quarter, as the Israel-based company integrated its business with the recently acquired IVAX Corp. But some market players were disappointed.

Net income for the quarter ended Sept. 30, 2006 increased 127% to $606 million, or 74 cents per share, compared to $267 million, or 40 cents per share, for the same period of 2005.

Results benefited from factors such as the company's tax rate; Teva estimates that its annual taxes will be 15.5% during 2006, compared to 18% for 2005.

Sales during the quarter gained 74% to $2.29 billion, compared to $1.31 billion in the third quarter of 2005. The mean analyst forecast had been for $2.33 billion revenue, according to the San Francisco research firm StarMine.

The company's results also include sales from the Miami drug-maker IVAX Corp., which Teva acquired in January.

"We are already realizing tremendous synergies from this acquisition, and we are well-positioned to capture all of the additional opportunities that IVAX presents," Israel Makov, President and CEO said in a press release.

Teva had improved sales in products such as the multiple sclerosis drug Copaxone, whose global sales for the quarter were $354 million, an increase of 15% over the third quarter of 2005.

Nonetheless, investors sold Teva shares 2.4% to $32.49 per share in afternoon trading on the New York Stock Exchange. The company's stock has risen from a 52 week low of $29.22 on July 24.

Citing factors such as the company's long-term earnings outlook and valuation, Standard & Poor's Corp. downgraded Teva to hold from strong buy. (S&P, like BusinessWeek.com, is owned by The McGraw-Hill Companies.)

As of November 6, 2006, Teva had 144 product applications awaiting final Food and Drug Administration approval. Collectively, the brand products covered by these applications have annual U.S. sales of approximately $87 billion.