Teva warns on 2018 profit
Teva warns on 2018 profit, may face migraine drug delays
By Tova Cohen and Steven Scheer | TEL AVIV
Teva Pharmaceutical Industries on Thursday said its 2018 results would be weaker than expected and that it might encounter delays for an important new migraine drug, pushing the drugmaker’s shares down more than 9 percent.
Israel-based Teva, the world’s largest generic drugmaker, is facing price erosion, fierce competition for its blockbuster multiple sclerosis drug Copaxone and a consolidating customer base, particularly in the United States.
It also said that the approval and launch of its migraine drug fremanezumab, one of two drugs the company pegged to help return it to growth in the future, could be delayed by an FDA warning letter received by manufacturer Celltrion, which will supply the drug to Teva.
Teva said it is in active dialogue with the FDA to maintain its priority approval date for the drug.
Chief Executive Kare Schultz attributed half of the expected revenue decline in 2018 to Copaxone, which began to face competition last year.
Persistent price pressure in the U.S. generics market, lower revenue following the sale of several businesses and expected competition to its ProAir inhaler in the second half of 2018 also hurt its outlook, he said on an earnings call.
Schultz said Teva was working to stabilize profitability in its generics business worldwide. This, combined with the company’s restructuring and speciality drug launches, would enable Teva to offset most of the decline in Copaxone revenue and return to growth.
“For sure in 2020 we will see growth,” Schultz told Reuters.
A key growth driver will be Austedo, Teva’s recently launched treatment for involuntary movements in patients with Huntington’s disease, which is expected to have revenue of $200 million in 2018, Schultz said.
He said Teva would no longer comment on expected generic price developments, noting such estimates were leading to steeper declines.
Teva earned 93 cents per share, excluding one-time items, in the fourth quarter of 2017, down from $1.38 a year earlier. Revenue fell 16 percent to $5.5 billion. Analysts had forecast Teva would earn 76 cents per share ex-items on revenue of $5.3 billion, according to Thomson Reuters I/B/E/S.
Teva has already announced a restructuring to combine its generic and speciality medicine businesses, cut more than a quarter of its workforce and close many of its factories.
The plan, announced in December, aims to reduce costs by $3 billion by the end of 2019 from about $16.1 billion in 2017.
COPAXONE SALES FALL
Generic drug sales in the fourth quarter fell to $3.1 billion from $3.7 billion. Sales of Copaxone fell 19 percent to $821 million. Teva forecast Copaxone sales of $1.8 billion in 2018.
“We noted further deterioration in the U.S. generics market and economic environment, further limitations on our ability to influence generic medicines pricing in the long term and a decrease in value from future launches,” Teva said.
For 2018, Teva forecast revenue of $18.3 billion to $18.8 billion, down from $22.4 billion in 2017, and EPS ex-items of $2.25 to $2.50, down from $4.01. Analysts were expecting EPS of $2.94 on revenue of $19.3 billion.
Teva had been saddled with about $35 billion in debt since acquiring Allergan’s Actavis generic drug business for $40.5 billion. Debt fell by $2.2 billion in the fourth quarter to $32.5 billion and by a further $1.1 billion so far in 2018.
Teva said it expects to pay off at least $3.5 billion in debt this year.
“Starting 2018 we are focused on meeting our financial obligations and ensuring a much more solid and sustainable business model,” Schultz said.
Chief Financial Officer Mike McClellan said Teva might look at more divestitures. The company has closed six plants since December and expects to announce another six this year.
Last week, the company said it planned to raise $5 billion in debt securities. In December, it announced the suspension of its dividend.
(Additional reporting by Ari Rabinovitch in Tel Aviv and Michael Erman in New York, Editing by Jason Neely and Jane Merriman)