Teva warns on 2018 profits citing US market, Copaxone

Earnings


Teva Pharmaceutical on Thursday said 2018 results would be weaker than expected due to difficult conditions in the U.S. generics market and fierce competition facing its branded multiple sclerosis drug.

Israel-based Teva, the world’s largest generic drugmaker, is facing price erosion, increased competition and a consolidating customer base, particularly in the United States.

It also has a hefty debt load that company executives said would be tackled in the near term.

CEO Kare Schultz attributed half of the expected revenue decline in 2018 to its multiple sclerosis blockbuster Copaxone, which began to face competition last year.

Persistent price pressure in the U.S. generics market, lower revenue following the sale of several businesses and expected competition to its ProAir inhaler in the second half of 2018 also hurt its outlook, he said on an earnings call.

Schultz said Teva would no longer comment on expected price developments, noting such estimates were leading to steeper declines.

Teva’s New York-listed shares fell more than 6 percent in early trade, having been indicated down 13.7 percent before the market opened. They fell nearly 50 percent last year.

The INDXX global generics and new pharma index is down 1.1 percent this year after a 17.5 percent rise in 2017.

Teva earned 93 cents per share, excluding one-time items, in the fourth quarter of 2017, down from $1.38 a year earlier. Revenue fell 16 percent to $5.5 billion. Analysts had forecast Teva would earn 76 cents a share ex-items on revenue of $5.3 billion, according to Thomson Reuters I/B/E/S.

Teva has already announced a restructuring to combine its generic and specialty medicine businesses, cut more than a quarter of its workforce and close many of its factories.

The plan, announced in December, aims to reduce costs by $3 billion by the end of 2019 from about $16.1 billion in 2017.

Generic drug sales in the fourth quarter fell to $3.1 billion from $3.7 billion. Sales of Copaxone fell 19 percent to $821 million. Teva forecast Copaxone sales of $1.8 billion in 2018.

“We noted further deterioration in the U.S. generics market and economic environment, further limitations on our ability to influence generic medicines pricing in the long term and a decrease in value from future launches,” Teva said.

For 2018, Teva forecast revenue of $18.3-$18.8 billion, down from $22.4 billion in 2017, and EPS ex-items of $2.25-$2.50, down from $4.01. Analysts were expecting EPS of $2.94 on revenue of $19.3 billion.

Teva had been saddled with about $35 billion in debt since acquiring Allergan’s Actavis generic drug business for $40.5 billion. Debt fell by $2.2 billion in the fourth quarter to $32.5 billion and by a further $1.1 billion so far in 2018.

Teva said it expects to pay off at least $3.5 billion in debt this year.

“Starting 2018 we are focused on meeting our financial obligations and ensuring a much more solid and sustainable business model,” Schultz said.

Chief Financial Officer Mike McClellan said Teva might look at more divestitures. The company has closed six plants since December and expects to announce another six this year.

Last week, the company said it planned to raise $5 billion in debt securities. In December, it announced the suspension of its dividend.



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