Teva Surprises With Better-than-expected First Quarter

Trouble drugmaker offers rosier outlook for rest of year, despite delay in approval for key migraine treatment

A Teva Pharmaceutical Industries building in Jerusalem, December 14, 2017.
\ Ammar Awad/ REUTERS

Teva Pharmaceuticals looked to be taking its first steps on the long road to recovery Thursday after reporting unexpectedly good first-quarter results and saying the outlook for the rest of the year was better than previous expected.

In the first full quarter under CEO Kare Schultz’s leadership, the company earned 94 cents per share excluding one-time items in the January to March period. That was down from $1.06 a year earlier but far ahead of the average of 67 cents analysts polled by Thomson Reuters I/B/E/S had predicted.

Teva’s revenue was also down, by 10% to $5.1 billion, but the figure was ahead of the $4.8 billion the market had forecast.

Moreover, the company said 2018 was shaping up to be a better year than it had previously expected. It raised its outlook for adjusted earnings per share to a range of $2.40 to $2.65 from a previous $2.25 to $2.50. Revenue is now forecast to be between $18.5 billion and $19 billion, up from $18.3 billion to $18.8 billion.

Analysts had been forecasting EPS of $2.47 on revenue of $18.7 billion.

The earnings represent only a single quarter, but after a painful battering for the world’s leading maker of generic drugs, it was some badly needed good news. Teva shares ended up 1.5% to 68.61 shekels ($18.93) on the Tel Aviv Stock Exchange, its highest in more than two months. The stock was ahead 1.3% to 18.84 in New York late morning local time.

Years of poor management at Israel’s biggest company were capped by the problematic 2016 acquisition of Allergan’s generic-drug business for $40.5 billion — a move that left Teva deeply in debt just as the global generics market was turning sour and generic competition began for its best-selling Copaxone drug for multiple sclerosis.

Erez Vigodman, the CEO who led the acquisition, stepped down, as did many executives and directors, and the company has been forced to make deep cost cuts. Teva’s New York-listed shares fell 50% last year.

Schultz, a Danish national, was called in to turn around the company, but his initial cost-cutting drive met with a tidal wave of criticism for the scope of job cuts. On Thursday, however, Schultz boasted that the turnaround program was having an impact.

“2018 is off to a solid start. Our restructuring program is proceeding well, and we are on track to meet our cost-reduction targets of $1.5 billion in 2018 and $3 billion by the end of 2019,” he said. “We have also benefited this quarter from the durability of Copaxone and a steady flow of generic launches in the U.S.”

First-quarter sales of Copaxone fell 40% in North America, where the company’s total generic product sales declined by 23%. In Europe, however, Teva’s revenues were higher, even for Copaxone.

The only bad news Thursday was an announcement by Teva that it does not expect to receive approval for its fremanezumab migraine treatment by mid-June, as it had expected, although it is still hoping for a launch before the end of the year.

Teva had been counting on fremanezumab to shore up its declining sales base, but U.S. regulators remain concerned about the manufacturing process by its South Korean subcontractor. The delayed launch threatens to put Teva behind two rivals in the segment, Amgen and Eli Lilly.

Another signal achievement for Schultz in the first quarter was how much of the company’s debt was paid down — some $2.2 billion, cutting its financial debt as of March 31 to $29.8 billion.

One reason it was able to do that is because the company got a $700 million payment from Allergan to settle a dispute over working capital. That helped boost cash flow from operations ןמ the quarter to $1.5 billion, compared to $100 million a year earlier.