Bloomberg News

Teva Cuts 2011 Forecast After U.S. Generic-Drug Sales Drop

November 04, 2011

(Adds comments on laquinimod in the eighth paragraph.)

Nov. 2 (Bloomberg) -- Teva Pharmaceutical Industries Ltd. cut its sales and profit forecast for the year after fewer new U.S. generic-drug introductions led to the company’s first drop in quarterly earnings in four years.

Revenue will be $18.3 billion to $18.6 billion, and earnings excluding some costs will be $4.92 to $5.02 a share, the Petach Tikva, Israel-based company said today in a statement. Teva in July had forecast sales of $18.5 billion to $19 billion and earnings in the range of $4.90 to $5.20 a share.

Teva stuck to its long-term target of $31 billion in sales by 2015 and said it’s considering returning more cash to shareholders. A bigger dividend would signal a shift away from Teva’s historic role as a growth stock, Gilad Alper, an analyst for Excellence Nessuah in Tel Aviv, said via e-mail today.

“They’re throwing in the towel,” Alper said. “Some growth-oriented investors might not like it, but it’s smarter than blowing money on short-term, acquisition-driven growth. It might attract value investors.”

Teva’s American depositary receipts were unchanged at $39.08 at 10:54 a.m. New York time. The ADRs have dropped 24 percent this year including reinvested dividends, compared with a 5.7 percent return for the Bloomberg Europe Pharmaceutical Index.

Third-quarter earnings excluding some costs dropped 6 percent to $1.11 billion, or $1.25 a share, from $1.18 billion, or $1.30, a year earlier, Teva said today in a separate statement. Profit beat the average estimate of $1.23 a share from 24 analysts surveyed by Bloomberg.

Cephalon Acquisition

Teva bought Cephalon Inc. this year in a bid to broaden a brand-name portfolio that has been dominated by multiple sclerosis drug Copaxone. The $6.5 billion acquisition closed last month and will contribute about 15 cents a share to the earnings target announced today, Teva said.

An experimental multiple sclerosis pill being investigated as a successor to Copaxone may require another clinical trial before it can win approval to be sold in the U.S., executives said today in a conference call with analysts. Teva is in talks with Food and Drug Administration officials on the drug, laquinimod, after disappointing results in two trials this year.

The Israeli company has made the most progress among its peers in diversifying its business away from U.S. generic drugs, Ronny Gal, an analyst for Sanford C. Bernstein & Co. in New York, wrote in a report before the results were released. A two- decade pattern of growth in the U.S. market may be about to come to an end, Gal said.

‘Declining Opportunities’

“We see declining opportunities as the number of drugs available is shrinking,” the analyst wrote.

Third-quarter sales in North America fell 20 percent to $2.18 billion, Teva said today. Generic-drug sales in the region sank 48 percent to $845 million as the company failed to introduce new products to compensate for diminishing revenue from older medicines.

“We expect a strong fourth quarter including an improved U.S. generics business,” Chief Executive Officer Shlomo Yanai said in the statement. A generic version of Eli Lilly & Co.’s schizophrenia drug Zyprexa will boost sales, he said.

An “important undisclosed product” that Teva originally intended to introduce in the third quarter would contribute significantly to fourth-quarter earnings per share if it can be introduced then, executives said in today’s conference call.

No Big Acquisition

“I don’t see a big acquisition on my radar screen,” Yanai said on the call. “Cash return is under consideration.”

Revenue worldwide rose 2.2 percent to $4.34 billion, missing analyst estimates. Sales in Europe rose 34 percent to $1.34 billion, while sales in other markets outside North America rose 56 percent to $817 million.

Sales of Copaxone climbed 26 percent to $1.02 billion.

The drugmaker’s reported third-quarter profit doesn’t meet generally accepted accounting principles because it excludes costs linked to acquisitions. Net income under generally accepted accounting principles fell to $916 million from $1.05 billion a year earlier.

--Editors: Kristen Hallam, Robert Valpuesta

To contact the reporter on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net


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