Saturday, February 5, 2011

Teva Pharmaceutical (NASDAQ: TEVA): Q4 Earnings Preview 2010

Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) the world's largest maker of generic drugs, is scheduled to release fourth-quarter earnings before the market open on Tuesday, February 8, 2011. Analysts, on average, expect the company to report earnings of $1.28 per share on revenue of $4.64 billion. In the year-ago period, the company reported earnings of 94 cents per share on revenue of $3.80 billion.

Teva Pharmaceutical Industries Limited engages in the development, production, and sale of a range of generic and branded pharmaceuticals, biogenerics, and active pharmaceutical ingredients (APIs) worldwide.

In the preceding third quarter, the Petach Tikva, Israel-based company's net income was $1.05 billion, or $1.15 per share, compared to $649 million, or $0.72 per share in the year-ago quarter. Excluding certain one-time charges, non-GAAP net income rose 47% to $1.18 billion from $806 million in the previous year, and earnings per share increased 46% to $1.30 from $0.89 in 2009. Revenue increased 20% to $4.25 billion from $3.55 billion. Analysts, on average, expected the company to post earnings of $$1.27 per share on revenue of $4.37 billion. 

At its last earnings call in November, Teva said that it expects fiscal 2010 earnings of $4.50 per share on revenue of $16.45 billion. 

In December, the company said that it is committed to achieve net profit and revenue forecast for fiscal 2015. The company still projects non-GAAP net income of $6.8 billion and revenue of $31 billion by 2015, which was announced in January 2010. The company expects respiratory products, including several new medicines, to contribute about $2.4 billion to its $31 billion revenue target for 2015. Teva added that it remains committed to executing its long-term strategic plan, including future acquisitions and expansion of its generic and branded R&D programs.. In addition, Teva's Board of Directors has authorized to repurchase shares up to an aggregate of $1 billion. In its share repurchase program, the company would buy its ordinary shares/ADRs over the next 12 months. Citing the strong cash generation and cash position, the Board said the program could be carried out without limiting Teva's ability to execute this plan fully or to meet its other capital requirements. The timing and number of shares in the program would depend on various factors, including share price and other market conditions. The company could use its internal cash resources for the buyback, which may be made from time to time at prices prevailing in the open market or in privately negotiated transactions.

In addition to their generic portfolio, Teva also possesses a strong branded portfolio led by Copaxone, the world's leading injectable therapy for multiple sclerosis. The world's largest maker of generic drugs has plans to bolster its portfolio of its own branded medicines over the next five years. Teva intends to seek U.S. and European approval for 10 products -- six of them new brands -- by 2015, with an eye toward significantly expanding its presence in the market for respiratory products. It expects four such submissions next year.

In November, the company said that the results from a Phase III study of QNAZE HFA, a nasal aerosol corticosteroid for the treatment of seasonal allergic rhinitis, suggest that it may be efficacious and safe for individuals seeking relief from the nasal symptoms associated with seasonal allergies. I n December, Teva Pharmaceutical and its partner Active Biotech announced initial results from the two-year Phase III ALLEGRO study, which demonstrated that relapsing-remitting multiple sclerosis, or MS, patients treated with 0.6 mg daily oral laquinimod experienced a statistically significant reduction in annualized relapse rate compared to placebo.

In order to strengthen its presence in Latin America, Teva Pharmaceutical Industries Ltd. recently announced its intention to acquire Peruvian company Corporación Infarmasa. With this acquisition, Teva will gain access to Infarmasa’s portfolio of more than 600 products, of which over 500 are currently marketed, as well as its development pipeline and manufacturing facilities. Infarmasa specializes in the manufacturing and development of branded and unbranded generic drugs, mainly corticosteroids, antihistamines, analgesics and antibiotics. The deal should allow Teva to strengthen its position in the antibiotics market in Perú. Teva already has a presence in Perú through its unit - Corporación Medco. This deal is in-line with Teva’s strategy of expanding its operations especially in Latin America.

However, intense competition and pricing pressure in the generics market still remain concerns. The company's branded franchise drug Copaxone, which represents approximately 15% of their sales as much as 30% of their operating profit, is facing numerous threats and challenges. The company is facing patent challenges from generic players like Sandoz, Momenta Pharmaceuticals (NASDAQ: MNTA), and Mylan Labs (NASDAQ: MYL). On the brigtht side, Teva generates high levels of cash flow, has a very strong debt to equity ratio of 18% and therefore, has the scale and financial muscle to be more flexible and aggressive with their business model than most of their peers.

Full Disclosure: None.

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