Investors are confused
Jeremy Levin, who replaced Shlomo Yanai as CEO of Teva Pharmaceutical Industries on Wednesday, set sparks flying in the market as he jettisoned his predecessor's annual company forecast. The drama, overshadowing the publication of first quarter results, sent the stock down 2% to 3% in New York and Tel Aviv.
Levin said a review of Teva's business plan is under way and he would not address the 2012 forecast, of $22 billion in sales and $5.48 to $5.68 earnings per share, until it was complete. Levin's statements cast a pall over the handover, despite his remark that "Had I been asked to describe my dream job I probably would have said CEO of Teva."
Teva chairman Phillip Frost said Yanai's most notable accomplishments as CEO were acquiring German generic drug maker Ratiopharm after a long battle with Pfizer, entering the Japanese market by purchasing Taiyo Pharmaceutical Industry and partnering with Procter & Gamble in the over-the-counter market. Company sales grew from $8 billion to $20 billion a year on Yanai's watch.
"After five extremely rewarding years as Teva's CEO, I will be stepping down today," Yanai said on Wednesday. "It has been an immense privilege to lead Teva's outstanding global team through such an exciting period. Together we turned Teva into a highly diversified global pharmaceutical company, with an expanded geographical footprint and additional lines of business." Referring to the financial report, the departing chief executive said the company began 2012 on the right foot. Teva's purchase of Cephalon in October helped it to outdo average analyst forecasts for profitability and earnings in Yanai's last quarter at the helm, despite sales that were well short of projections.
5% organic growth
Teva earned $1.3 billion for the quarter, $1.47 per share on a non-GAAP basis that excludes one-off items consisting of amortization of intangible assets acquired as part of the Cephalon deal, provisions for shuttering a factory and restructuring costs at Taiyo and Cephalon. The average forecast by analysts was $1.43 per share.
Revenues rose 25%, to $5.1 billion, compared to analysts' forecasts of $5.5 billion. Yanai pointed out that organic growth - not attributable to acquisitions - was 5%.
A weakened euro in dollar terms clipped $81 million off quarterly sales, and renegotiation of distribution sales agreements for certain branded products knocked off another $180 million. Another major contributing factor in the shortfall was a drop in European generic sales, as also reported by market rivals Sandoz and Mylan: Teva's generic sales in Europe fell 15%, to $755 million, mainly due to government price reforms in Germany. It can also be assumed that preemptory purchases of Copaxone and Provigil by distributors the previous quarter in anticipation of price increases at the beginning of the year cut into sales too and contributed to Teva falling short of analysts' expectations.
U.S. generic sales, a major sore point for Teva last year, increased 29% from the first quarter of 2011, to $1.2 billion, from the launch of seven new products, including generic versions of the antipsychotic Zyprexa and Seroquel, an antidepressant. The company also benefited from an alliance with Ranbaxy Laboratories of India for marketing its generic version of Lipitor for lowering cholesterol, the most widely sold drug in the world, attaining a 40% to 45% U.S. market share for the drug in the first quarter.
Outside of the United States and Europe, Teva registered $623 million in generic sales, up 30% from the equivalent period last year, thanks mainly to the Taiyo acquisition which contributed sales of $120 million.
Revenues from branded products rose 54% to $2.1 billion, mainly from the inclusion of Cephalon products. Three of these, Provigil, Treanda, and Nuvigil, contributed $523 million in sales, accounting for 72% of overall revenue growth in this category.
Copaxone sales increased 8.5% in the first quarter, to $909 million, despite January's 15% price hike. Copaxone sales in the United States dipped 1% to $617 million but the company managed to maintain its 40% market share. Non-U.S. sales for Teva's blockbuster multiple sclerosis treatment rose 14% against the last year's parallel quarter, to $324 million.
