Teva: Too Many Cooks?
Now on its seventh CEO in the last 10 years and in danger of losing its most valuable branded product, Teva is searching for answers.
Teva Pharmaceutical Industries Ltd.
5 Basel St., P.O. Box 3190
Petach Tikva 4951033, Israel
|Product||2016 Sales||2015 Sales|
|Generics – U.S.||$4,556||$4,795|
|Generics – ROTW||$3,871||$2,599|
|Generics – Europe||$3,563||$3,146|
All sales are in millions of dollars.
|1H 2017||1H 2016|
In millions of dollars, except EPS
The club for former Teva CEOs is not nearly as exclusive as it used to be. With the naming of new CEO Kåre Schultz in September, the company is now on its seventh chief executive since 2007 and sixth since 2012. Schultz’s permanent predecessor, Erez Vigodman, stepped down in February after a run of bad news for the company, including a $519 million penalty paid to SEC for bribing foreign officials in December and the invalidation of several key Copaxone patents in January, not to mention 2017 revenue and profit forecasts below Wall Street estimates.
So Mr. Schultz’s work, it appears, is cut out for him. He faces considerable doubt as to whether Teva’s leading branded product will be able to retain its exclusivity, questions about whether the company paid too much for last year’s acquisition of Actavis Generics, and possible disappointment regarding the investigational compound laquinimod – which Teva leaders had hoped would be a successful follow-on to Copaxone – after that compound failed to meet the primary endpoint in a key clinical trial. What is next for Teva, it would seem, is an open question.
For all this, Teva’s top-line revenue in 2016 was up by 11.5 percent to $21.9 billion, though a significant portion of the improvement came due to the inclusion of revenue from the former Actavis Generics. Net income, however, fell all the way from $1.6 billion to $311 million and earnings per share tumbled from $1.82 to just $0.07, due primarily to a $900 million goodwill impairment related to the still-disputed March 2016 acquisition of Rimsa (Teva is suing the prior owners for allegedly hiding the existence of unlawful products and evading regulatory requirements).
According to Teva’s non-GAAP calculations which excluded a number of such one-time items, the company’s net income would have improved by about 10 percent in 2016.
In the first half of 2017, the top line rose another 14.9 percent to $11.32 billion, but net income was negative $5.33 billion and EPS was -$5.37. This was primarily due to a goodwill impairment charge of $6.1 billion in the second quarter.
During the second quarter of 2017, Teva executives identified certain developments in the U.S. market, which negatively impacted the company’s outlook for its U.S. generics business. These developments included additional pricing pressure in the U.S. market as a result of customer consolidation into larger buying groups to extract further price reductions; accelerated FDA approval of additional generic versions of off-patent medicines, resulting in increased competition for these products; and delays in new launches of certain of Teva’s generic products. These developments caused Teva to revisit its assumptions supporting the cash flow projections for its U.S. generics reporting unit, which eventually led to the recording of a goodwill impairment charge of $6.1 billion related to its U.S. generics reporting unit in the second quarter of 2017.
Teva’s generic sales during 2016 totaled $11.99 billion, a 13.8 percent improvement over the previous year. Sales in the United States fell by 5 percent to $4.56 billion, but sales in Europe were up 13.3 percent to $3.56 billion, and rest of the world sales jumped by 48.9 percent to $3.87 billion. Much of the non-U.S. growth came due to the inclusion of Actavis Generics, acquired in August 2016, and the beginning of a joint venture with Takeda in Japan in April 2016, as well as currency fluctuations and the impact of hyperinflation in Venezuela. According to company executives, the reason for the drop in U.S. generic sales was a loss of exclusivity on esomeprazole (the generic of Nexium) and aripiprazole (the generic of Abilify, a decline in sales of budesonide (the generic of Pulmicort) due to increased competition, the divestment of certain products due to the Actavis acquisition, and a decline in sales of capecitabine (the generic of Xeloda). Key generic launches by Teva in the course of the year included imatinib (Gleevec), rosuvastatin (Crestor), and daptomycin (Cubicin). In the first half of 2017, Teva’s total generic sales were $6.14 billion, an improvement of 22.4 percent over the first half of 2016, again primarily due to the inclusion of Actavis Generics revenue. The U.S. portion of generic sales for the first half rose 43 percent to $2.67 billion, while European sales were up 24.6 percent to $1.95 billion and ROW sales dropped 4.2 percent to $1.52 billion. Significant U.S. generic launches in the first half of 2017 included metformin (Glumetza), atomoxetine (Strattera), and ezetimibe (Zetia). As of the end of June, Teva’s generic pipeline included 311 product applications awaiting FDA approval, including 69 tentative approvals. In Europe the company is holding about 2,140 marketing authorization applications pending approval in 37 European countries, relating to 243 compounds in 495 formulations.
Sales of Teva’s leading branded product, the multiple sclerosis drug Copaxone, grew by 5 percent to $4.22 billion in 2016, primarily due to higher net pricing. However, in January 2017 a U.S. district court ruled that four key patents protecting Copaxone’s 40 mg/mL formulation were invalid, a decision that was closely followed by the Erez
Vigodman resignation as CEO. The company is appealing, and no generic competitor to the 40 mg/mL formulation has been launched yet as of press time, though published reports suggest that one may arrive by the end of the year. In the first half of 2017, sales of Copaxone were down 7.2 percent to $1.99 billion.
In February, Teva announced that Dr. Yitzhak Peterburg, who had served as chairman of the Teva board of directors since January 2015, was appointed interim president and CEO, effective immediately. This announcement followed the mutual agreement between the board of Teva and former CEO Erez Vigodman that Vigodman would step down.
Then, in September, Teva’s board named Kåre Schultz to become the company’s new president and CEO. Schultz had most recently served as president and CEO of H. Lundbeck A/S, where he was credited with leading significant restructuring initiatives and launching a turnaround strategy focused on driving a sustainable global cost structure and operational model. As a result of his leadership, executives say, the company is on track to achieve all-time high revenue and earnings.
Prior to his role at Lundbeck, Schultz served as chief operating officer of Novo Nordisk, where he had a key role in building the company into one of the world’s best-performing drug makers and implementing a metrics-focused approach to operations. Schultz also led the company’s expansion into the U.S. and Chinese markets. He serves as the chairman of the board of directors of Royal Unibrew A/S, as a member of the board of directors of LEGO A/S, and as a member of the board of directors of Bitten og Mads Clausens Fond, the holding vehicle for Danfoss A/S. Schultz holds a master’s degree in Economics from the University of Copenhagen.
“I am honored to join Teva, an iconic company that I have long admired during my career,” Schultz says. “What drew me to Teva, and what makes Teva different from its peers, is its unique commitment to growing an extensive global reach while continuing to provide new and high-quality treatments for patients and an innovative culture for its employees. I am proud to be joining a company that helps millions of patients around the world on a daily basis with its broad range of generic and specialty drugs and solutions. I look forward to working closely with the entire team at Teva to build a future of success for the company and its stakeholders.”
Acquisitions & Collaborations
In May, Teva and Otsuka Pharmaceutical Co. announced an agreement covering Japan for Otsuka to develop and commercialize Teva’s investigational drug candidate fremanezumab, an anti-calcitonin gene-related peptide monoclonal antibody for the prevention of migraine. Otsuka secured exclusive rights in Japan to fremanezumab, which Teva is globally developing in other countries.
Otsuka is to pay Teva a lump-sum payment of $50 million. Milestone payments will be made upon filing and regulatory approval in Japan and then upon achievement of specified revenue targets. Future clinical trials in Japan will be carried out and funded by Otsuka. In addition, Otsuka holds exclusive sales rights and will pay royalties on revenues to Teva.
During September, Teva announced it had entered into a definitive agreement under which CooperSurgical will acquire Paragard (intrauterine copper contraceptive), a product within Teva’s global Women’s Health business, in a $1.1 billion cash transaction. Paragard had revenue of about $168 million for the trailing 12-month period ended June 30, 2017. This transaction includes Teva’s manufacturing facility in Buffalo, N.Y., which produces Paragard exclusively.
Teva is continuing to actively pursue additional divestiture opportunities, including the sale of the remaining assets of its global Women’s Health business, as well as its Oncology and Pain businesses in Europe. Company leaders expect to generate at least $2 billion in total proceeds from the sale of these businesses, as well as additional asset sales to be executed by year end 2017.
In The Pipeline
During January, the FDA approved Vantrela ER (hydrocodone bitartrate) extended-release tablets formulated with Teva’s proprietary abuse deterrence technology. Vantrela ER is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate. The product’s approval was supported by a clinical program that evaluated the safety and efficacy of Vantrela ER, as well as its abuse potential in laboratory-based in vitro manipulation and extraction studies, pharmacokinetic studies, and clinical abuse potential studies.
In April, FDA approved Austedo (deutetrabenazine) tablets for the treatment of chorea associated with Huntington’s disease. Austedo is the first deuterated product approved by FDA and only the second product approved in HD. The product was previously granted Orphan Drug Designation by FDA. The FDA approval was based on results from a Phase III randomized, placebo-controlled study to assess the safety and efficacy of Austedo in reducing chorea in patients with HD (First-HD).
A rare and fatal neurodegenerative disorder, HD affects more than 35,000 people in the United States. Chorea – involuntary, random and sudden, twisting and/or writhing movements – is one of the most striking physical manifestations of this disease and occurs in approximately 90 percent of patients. “Chorea is a major symptom for many living with Huntington disease,” says Michael Hayden, M.D., Ph.D., President of Global R&D and Chief Scientific Officer at Teva. “It impacts patients’ functionality and activities of daily living, and there have been limited treatment options for these patients. Based on the results demonstrated in the clinical development program which supported the approval of Austedo and our ongoing commitment to patients, we feel uniquely positioned to bring this treatment option forward.”
In May, Teva and partner developer Active Biotech announced results from the CONCERTO trial in patients with relapsing-remitting multiple sclerosis. The primary endpoint in CONCERTO – the evaluation of laquinimod versus placebo to evaluate the time to Confirmed Disability Progression after at least 3 months – was not met.
Other data details announced by the companies show that on the secondary endpoint which measured change in brain volume – an indicator of disability progression over time – compared to baseline was positive (40 percent improvement over placebo at month 15). Other encouraging results were seen on the secondary endpoint of time to first relapse (risk reduced by 28 percent) and the exploratory endpoint of annualized relapse rate (risk reduced by 25 percent). As with the primary endpoint, secondary endpoints measuring time to CDP at six and nine months did not reach significance. On the exploratory endpoint of reduction of the number of gadolinium-enhancing T1 lesions at month 15, laquinimod demonstrated a 30 percent reduction.
“We have learned a great deal from the CONCERTO trial and we will continue our analysis of the data,” Dr. Hayden says. “Although we are disappointed by not meeting the primary endpoint, we did see positive results on a number of secondary and exploratory endpoints which fuels our belief in the potential of laquinimod as a possible treatment for neurodegenerative diseases. While we have no current plans to further pursue laquinimod in RRMS, we are continuing to study it in two other trials.”
In June, Teva and partner developer Xenon Pharmaceuticals Inc. announced topline results in a Phase II study of topical TV-45070 in patients with post-herpetic neuralgia. TV-45070 did not meet the primary endpoint of a statistically significant change in pain from baseline to week four as assessed by the numeric rating scale. Secondary endpoints were also not met. The companies plan to further analyze the data from this study to determine the next steps for TV-45070, and may look to present study data at a relevant forthcoming scientific conference.
Also in June, FDA accepted for review a biologics license application for CT-P10, a proposed monoclonal antibody (mAb) biosimilar to Rituxan, which is used to treat patients with non-Hodgkin’s lymphoma, chronic lymphocytic leukemia, rheumatoid arthritis, granulomatosis with polyangiitis, and microscopic polyangiitis. The BLA for CT-P10 includes data for CT-P10 and reference Rituxan in terms of efficacy, safety, immunogenicity, pharmacodynamics, and pharmacokinetics. These trials were conducted in more than 600 patients and include up to 104 weeks of data. CT-P10 was approved by the European Commission in February 2017 and has launched in the U.K., Germany, Netherlands, Spain, and the Republic of Korea. FDA regulatory action is expected in the first quarter of 2018.
During July, FDA accepted for review a biologics license application for CT-P6, a proposed monoclonal antibody (mAb) biosimilar to Herceptin, which is used for the treatment of human epidermal growth factor receptor 2 (HER2)-overexpressing breast cancer and metastatic gastric cancer. FDA regulatory action is expected during the first half of 2018.
The BLA for CT-P6 includes data for CT-P6 and reference trastuzumab in terms of efficacy, safety, immunogenicity, pharmacodynamics, and pharmacokinetics. These trials were conducted in more than 500 patients in 22 countries. CT-P6 has been approved by the Korean Ministry of Food and Drug Safety. Teva’s partner developer Celltrion Inc. also filed marketing authorization applications for CT-P6 to the European Medicines Agency in October 2016.
During August, FDA approved Austedo for the treatment of tardive dyskinesia in adults. Tardive dyskinesia is a debilitating and often irreversible movement disorder characterized by repetitive and uncontrollable movements of the tongue, lips, face, trunk, and extremities. The condition affects about 500,000 people in the United States and can be caused by certain medications used to treat mental health or gastrointestinal conditions. The approval was based on results from two Phase III randomized, double-blind, placebo-controlled, parallel group studies assessing the efficacy and safety of Austedo in reducing the severity of abnormal involuntary movements associated with tardive dyskinesia (AIM-TD and ARM-TD).
In September, Teva presented new data evaluating fremanezumab for the prevention of migraine. Across the Phase III HALO studies in chronic and episodic migraine, fremanezumab achieved statistically significant and clinically meaningful results for all 25 primary and secondary analyses in both monthly and quarterly dosing regimens.
In the chronic migraine study, endpoint analyses included significant reduction in the number of monthly headache days of at least moderate severity during the 12-week period after first dose for both dosing regimens [monthly (-4.6 days) and quarterly (-4.3 days) versus placebo (-2.5 days)]; and statistically significant reduction in the number of monthly migraine days during the 12-week period after the first dose, for both dosing regimens [monthly (-5.0 days from a baseline of 16.0 days) and quarterly (-4.9 days from a baseline of 16.2 days) versus placebo (-3.2 days from a baseline of 16.3 days)], and during the 4-week period after first dose, for both dosing regimens.
In episodic migraine, endpoint analyses presented included reduction in the number of monthly migraine days during the 12-week period for both dosing regimens [monthly (-3.7 days from a baseline of 9.2 days) and quarterly (-3.4 days from a baseline of 8.9 days) versus placebo (-2.2 days from a baseline of 9.1 days)] and during the 4-week period after first dose, for both dosing regimens; and reduction in the number of monthly headache days of at least moderate severity during the 12-week period for both dosing regimens [monthly (-2.9 days) and quarterly (-3.0 days); vs placebo (-1.5 days)] and during the 4-week period after first dose, for both dosing regimens.