Lower US sales lead to 13-percent drop in Teva's 3Q net income

Teva announced Wednesday that third-quarter net income fell 13 percent to $916 million as the drugmaker launched fewer generic medicines in the US. The company noted that sales of generic drugs in North America slumped 48 percent to $845 million, as overall revenue in the region dropped 20 percent to $2.2 billion. Teva said the quarter "lacked significant new launches" in the US, while the prior-year period also benefited from sales of a generic version of Pfizer's Effexor XR and other products that were "absent or substantially diminished" in the current quarter.

"The third quarter produced an overall mixed performance," remarked CEO Shlomo Yanai, noting that the result of the US generics business was partially offset by "strong European and international generic sales, combined with strong results from our branded units." Yanai said Teva expects "a strong fourth quarter including an improved US generics business, led by the exclusive launch" of a generic version of Eli Lilly’s schizophrenia drug Zyprexa. Executives added that an "important undisclosed product" that was originally intended to be launched in the third quarter would contribute significantly to fourth-quarter earnings per share if it can be introduced then.

The company recorded overall revenue of $4.3 billion for the quarter, up 2 percent year-on-year, although the figure fell below analyst estimates of $4.5 billion. Sales of Copaxone climbed 26 percent to $1 billion, with revenue from the multiple sclerosis drug increasing 28 percent in the US to $752 million due to price increases and volume growth. Teva said that sales of the product outside the country grew 22 percent to $268 million. Meanwhile, revenue from Azilect jumped 20 percent, with growth recorded in both Europe and the US.

Sales in Europe rose 34 percent to $1.3 billion, which the company explained was primarily due to "the inclusion of ratiopharm, mainly in Germany, France, Spain and Italy." Revenue from other markets surged 56 percent to $817 million, in part due to the inclusion in Japan of Taiyo Pharmaceutical, which Teva bought in July, as well as higher sales in major markets in Latin America and Russia.

For the full year, Teva cut its revenue forecast and said that sales will be between $18.3 billion and $18.6 billion, down from an earlier prediction of $18.5 billion to $19 billion. The drugmaker also lowered its earnings outlook, and now expects earnings in the range of $4.92 per share to $5.02 per share, revised from previous guidance of $4.90 per share to $5.20 per share. Some analysts had expected the company to lift its outlook as a result of Teva's $6.5-billion acquisition of Cephalon last month, with Israel Brokerage & Investments analyst Natali Gotlieb noting that a failure to do so would "in effect, amount to a profit warning."

Teva however reaffirmed its long-term growth forecast for 2015 and said it’s considering returning more cash to shareholders. Yanai noted that a "cash return is under consideration," but he ruled out a large purchase of a pharmaceutical company. "I don’t see a big acquisition on my radar screen," the CEO commented. Excellence Nessuah analyst Gilad Alper remarked that a larger shareholder dividend would signal a shift away from Teva’s historic role as a growth stock. "They’re throwing in the towel," Alper said, adding that although "some growth-oriented investors might not like it…it’s smarter than blowing money on short-term, acquisition-driven growth. It might attract value investors."

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