Teva Disappoints With a Drop in Profit

Yoram Gabison
Yoram Gabison
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Yoram Gabison
Yoram Gabison

Teva Pharmaceutical Industries yesterday posted $1.1 billion in adjusted non-GAAP earnings in the fourth quarter of 2012, 19% less than in the same quarter of 2011. The $1.32 fully-diluted earnings per share was also one cent off the $1.33 average analyst forecast.

Net income according to GAAP standards totaled $320 million for the quarter, 37% below GAAP earnings in the fourth quarter of 2011 due to a 46% plunge in operating profits to $330 million, reflecting a 6.3% operating margin as opposed to 10.7% in the same period of the previous year.

On the Tel Aviv Stock Exchange, shares of Teva slipped 1% yesterday to NIS 138 in heavy trading of NIS 54.9 million shares, making it the day's volume leader. In New York, Teva was down 0.4% to $38.03.

"Overall, the results were a bit disappointing," Leader Capital Markets analyst Sabina Podval said.

Canaccord Genuity analyst Randall Stanicky said sentiment around the company had not been strong "but mixed results are unlikely to inspire, nor is the lack of a more meaningful dividend increase ... The story is clearly going to take time."

Profits were weighed down by provisions amounting to $822 million, including $495 million following the termination of investment in CureTech, developer of an antibody for treating colon cancer, and $284 million in amortization of intangible assets.

Revenues for the company totaled $5.25 billion for the quarter, a 7.5% drop from the comparative period of the previous year and 0.4% under the average analyst forecast. Sales suffered from weakness in all of Teva's generics markets, reflected by a 10.8% overall drop in generics sales to $2.7 billion, as well as a 7% decline in sales for the company's proprietary and brand name drugs to $2.1 billion.

Teva's generic drug sales in the U.S. totaled $1 billion, 17% less than in the same quarter in 2011 when the company enjoyed exclusive marketing rights for the anti-psychotic treatment Zyprexa and a profit-sharing agreement with India's Ranbaxy for marketing the generic version of Lipitor, a drug used for lowering blood cholesterol.

Revenues in Europe's generics market dropped 5% to $930 million due to currency weakness against the dollar, reduced sales in Italy and Spain following government price lowering measures, and as a result of mounting competition. These were partially offset by sales increases in several of the firm's major markets including Germany, Britain, France and Poland.

Generic sales in Teva's other generics markets dropped 8% to $698 million.

The 7% drop in sales for Teva's specialty drugs to $2.1 billion was mainly due to the introduction of generic competition for Provigil, a treatment for narcolepsy, during the first half of 2012 which led to the product's sales collapsing 93% to just $25 million in the fourth quarter.

Copaxone sales for the quarter, however, increased 14% on a year-over-year basis to $1.059 billion, including $800 million in the U.S. with a 12% gain as a result of increased prices.

Teva announced that it will increase shareholder dividends by 15% to 31 cents per share. The company repurchased $500 million of its stock at an average price of $39.30 per share, for a current loss of $15 million.

CEO, Jeremy Levin, said in the conference call accompanying the company's release of its quarterly results that it intends to sell its injected products plant at Irvine, California. The plant endured an extended shutdown due to quality control problems and operated at under capacity. Levin said the company is interested in selling the plant to a strategic investor who will continue manufacturing for Teva.

The company has five alternative sites for producing injected products, according to Levin, including Godollo, Hungary. Eyal Desheh, Teva's CFO, revealed that Copaxone provided the company with 44% of its operating profits in the fourth quarter: $572 million.

Reuters contributed to this report.

The headquarters of Teva pharmaceuticals.