Bloomberg News

Teva Profit Rises on Generic Oxycontin, Lotrel Drugs

August 01, 2007

Teva Pharmaceutical Industries Ltd. (TEVA), the world's biggest maker of generic drugs, reported the slowest profit growth in five quarters as the company lost exclusive rights to make copies of two cholesterol treatments.

Net income in the second quarter rose 5.3 percent to $515 million, or 63 cents a share, from $489 million, or 59 cents, a year earlier, Teva said today. That's the smallest increase since the first quarter of 2006, when it reported a net loss. Sales gained 10 percent to $2.4 billion, a quarterly record.

Shares of the Petah Tikva, Israel-based company declined as much as 4.1 percent. Teva lost exclusive rights to sell generic versions of two cholesterol medicines, Bristol-Myers Squibb Co.'s Pravachol and Merck & Co.'s Zocor. Chief Executive Officer Shlomo Yanai said earnings per share would come in at about $2.30 this year, unchanged from his previous forecast.

``I'd suspect they're being conservative,'' said Richard Gussow, who follows Teva at Excellence Nessuah in Ramat Gan, Israel. He added that Teva's decline mirrors a slide in the entire Israel equity market. ``Teva is just another stock that's taking it on the chin.''

Teva's American depositary receipts rose 58 cents, or 1.4 percent, to $42.60 at 4 p.m. in New York. The company's Israeli shares fell 5 shekels, or 2.7 percent, to close at 181 shekels at Tel Aviv. Today's decline trimmed this year's share gain to 39 percent.

Acquisition Hunt

Teva is eyeing acquisitions after losing a bid for the German Merck KGaA's generic-drug unit to Mylan Laboratories in May, Yanai said. Mylan paid 4.9 billion euros ($6.7 billion) for the unit.

``We're looking at Germany very seriously,'' he said. ``It's a dynamic market that's going through a lot of change. The question is how to make the right investment without losing your pants.''

The company also wants to step up research into biopharmaceutical development, Yanai said. Teva is currently in the final stages of clinical trials on laquinimod, an oral multiple sclerosis treatment licensed from Sweden's Active Biotech AB.

Profit beat the $460.6 million median estimate of nine analysts surveyed by Bloomberg. Analysts had expected Teva to report earnings per share of 56 cents, 13 percent lower than the actual result, said Ori Hershkovitz, an analyst at Sphera Fund in Tel Aviv.

Branded Drugs

Revenue from Teva's proprietary Copaxone treatment for multiple sclerosis increased 23 percent to $436 million. Teva also benefited as competitors such as Watson Pharmaceuticals Inc. dropped out of the U.S. market for Oxycontin copies. The company was cleared to sell its copy of Novartis AG (NOVN)'s Lotrel heart medicine after a U.S. judge struck down an injunction in June.

``To show growth over the second quarter of 2006 is impressive,'' said Yisca Erez, an analyst at CLAL Finance Batucha in Tel Aviv, in a telephone interview. ``Lotrel was very successful, and Oxycontin has better prices. Those are the main drivers of growth.''

The Israeli drugmaker ``took the risk of placing three months of product in the marketplace even before Novartis managed to obtain a restraining order preventing the move,'' she said in a note to investors. Teva has 90 percent of the U.S. market for generic Lotrel, said George Barrett, CEO of Teva US, on a conference call.

Generic Oxycontin

Teva is now the only major supplier of a generic version of Purdue Pharma LP's Oxycontin narcotic pain reliever. Teva is approaching a 70 percent share of the market, Barrett said.

Teva has 153 applications at the U.S. Food and Drug Administration worth about $90 billion in branded sales, and says it is the first to file on 40 of them. The FDA grants six-month sales exclusivity to generic-drug makers as a reward for being the first to challenge patents on brand-name medicines.

The company's branded Parkinson's disease medicine, Azilect, had revenue of $28 million, compared with $6 million in the second quarter of 2006.

Azilect's contribution is ``good considering that this drug was only launched last year,'' Erez said. Teva may generate $130 million in Azilect sales this year, she said.

Teva's global respiratory sales surged 49 percent to $181 million in the quarter, fueled by the ProAir asthma inhaler. The drugmaker gained the product when it acquired Ivax Corp. for $7.6 billion last year. Teva is boosting ProAir sales as the U.S. moves toward a ban on chlorofluorocarbon-based inhalers.

Britain bought more of Teva's drugs, making it the company's most important European market for the first time, said Chief Financial Officer Dan Suesskind on the conference call. Teva is also ``optimistic'' about the potential of Russia, which last year had trouble funding its state-drug program, the DLO.

Legal Fight

Teva is battling for the right to sell a generic copy of Wyeth's Protonix treatment for heartburn. Teva has agreed not to start selling the drug until Sept. 7 as courts consider Wyeth's request for an injunction, Wyeth said in an e-mailed statement yesterday.

The Israeli company is competing with India's Sun Pharmaceutical Industries Ltd. (SUNP) for 180-day U.S. sales exclusivity on the Protonix copy. Protonix had revenue of $474 million in the first quarter, making it Wyeth's third-best-selling product, the Madison, New Jersey-based company said April 19.

To contact the reporter on this story: Alex Kuli in Budapest at akuli@bloomberg.net.

To contact the editor responsible for this story: Christopher Elser in London at celser@bloomberg.net.


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