Teva Shares Take Tumble After Warning of Bleak 2019

Israeli drug maker sees a repeat this year of the tough market conditions of 2018

File photo: A Teva Pharmaceutical Industries building in Jerusalem, December 14, 2017.
Ammar Awad/Reuters

Teva Pharmaceuticals shares tumbled on Wednesday after the Israeli company disappointed investors by saying this year would no better than the last and forecast lower revenue and profit in the face of generic competition for two key branded drugs.

Shares of the world’s largest generic drug maker plunged 7.7% to a close of 64.24 shekels ($17.61) on the Tel Aviv Stock Exchange, wiping out six weeks of gains and 5 billion shekels of market capitalization. They were trading down 6.9% at $17.80 late morning local time in New York.

“We continue to expect that 2019 will be the trough for our business, a year in which we will experience similar challenges to those of 2018 including the continued erosion of Copaxone in the U.S. and Europe as well as the introduction of generics in the ProAir [inhaler] market,” CEO Kare Schultz said.

>> Teva raises 2018 earnings outlook, says 'very good signs' of new drug launch

For 2019, the company forecast adjusted earnings per share of $2.20-$2.50 and revenue of $17 billion to$17.4 billion. Analysts surveyed by Reuters were forecasting EPS of $2.81 on revenue of $17.9 billion for the year.

Teva ascribed the weak outlook to an expected 37% drop in sales of its best-selling Copaxone multiple sclerosis treatment to just $1.5 billion. Copaxone has been under pressure since the first generic versions were launched in at the end of 2017.

In addition, its ProAir inhaler will be what Teva called “significant erosion” in sales from new generic competition from 2018 levels of $397 million.

On the positive side, Teva predicted that sales of its new migraine treatment Ajovy would grow from just $3 million last year to $150 million in 2019. The company has been counting on Ajovy, which won approval from the U.S. Food and Drug Administration in September, to revive its fortunes but is meeting stiff competition from two other new entrants to the market.

Sales of Teva’s Austedo, a treatment of chorea associated with Huntington’s disease, should ramp up to $350 million from $204 million.

The 2019 outlook pointed up the immense challenges Schultz, who was hired at the end of 2017, faces reviving Teva after years of mismanagement. The company not only ins struggling with declining sales of Copxone, once a huge money maker, but falling prices of generic drugs in Teva’s key U.S. market and reducing its massive debt.

For fourth-quarter 2019, Teva earned 53 cents a share excluding one-time items in the fourth quarter of 2018, down from 93 cents a year earlier.

Revenue fell 16% to $4.6 billion due to generic competition to Copaxone, declining revenue from U.S. generic drugs and loss sales due to the divestment of some products and discontinuation of certain activities.

The fourth-quarter figure was about in line with the 54 cents a share on revenue of $4.5 billion, according to I/B/E/S data from Refinitiv.

North American sales of Copaxone tumbled 44% in the quarter to $356 million while generic product sales in North America fell 10%.

On a GAAP basis, which includes one-time items, teva posted a loss of $3 billion, or $2.85 a share, narrowing from a loss of $11.6 bilion a year earlier, or $11.44 a share.

In an interview published in The Wall Sreet Journal on Wednesday, Schultz said Teva was looking for future growth in high-priced biotech medicines, which are much more complex than conventional medicines and target specialty diseases like cancer and rheumatological conditions

“We figured out a strategy where we’d continue to be leaders in generics but really focus our R&D on innovative biologics and biosimilars,” Schultz said. “That’s what we’re working hard on right now.”

Schultz has halved the size of Teva’s research pipeline to focus on biologics and now has 25 drugs in development, mostly early stage, the Journal said.