Generics Giant Teva Shines
Posted on: November 8, 2008 - Email Article - Printable Version
With another tough day in the market following the Presidential Election, the word’s largest generic drug maker topped 3rd Quarter net profit forecasts. Teva [TEVA: 59.94, -0.40 (-0.66%)], headquarted in Israel, develops, manufactures, and markets generic and human pharmaceuticals. They also participate in the formation of active pharmaceuticals, or APIs, in North America, Europe, Latin America, Asia, and Israel. Teva’s net profit for the quarter, excluding one-time items, was $599 million or $0.72 per diluted share, compared with $525 million, or $0.64 per share. Sales increased 20% to a record of $2.84 billion. Average analysts estimates from Reuters for Teva were EPS of $0.70 on sales of $2.89 billion.
Pharmaceutical sales in North America were responsible for 60% of total pharmaceutical sales. These sales reached a record of $1.614 billion and represented an increase of 23% compared with the 3rd Quarter last year. Pharma sales in Europe accounted for 25% of total pharmaceutical sales and increased 10% compared to the same period a year ago. Spain, France, and Poland contributed significantly to the strong generic sales. Teva showed strong cash flow from operation of $710 million, more than doubling its cash flow from operations of $332 million in the 3rd Quarter of 2007.
Expenses
Net R&D expenses were $194 million, or 6.8% of sales, compared to $141 million recorded in the 3rd Quarter of 2007. They saw a large jump, 38%, in R&D due to Teva’s strategic plan to double generic R&D output by 2012 as well as expand R&D activity in biogenerics and its innovative business, according to the Company’s press release. Selling, General, and Administrative expenditure totaled $648 million, or 23% of sales. The increase from the 3rd Quarter SG&A of $458 million was due to the termination of a distribution agreement with Sanofi-Aventis [SNY: 38.88, -0.56 (-1.42%)] in North America as of March 31, 2008. The agreement totaled $171 million for the Quarter.
Guidance
Teva raised its outlook for 2008 providing an EPS range of $2.79 to $2.85 a share from a previous forecast of between $2.69 and $2.75. Analysts had predicted an average of $2.74 a share in 2008. Shlomo Yanai, president and CEO of Teva, said “This was a very good quarter for Teva. In the midst of these turbulent economic times, we experienced once again the benefits of our balanced business model…We entered into a new strategic partnership in Japan, the world’s second largest pharmaceutical market; closed our acquisition of Bentley in Spain; and secured the necessary financing for our acquisition of Barr Pharmaceuticals, a deal which we expect to close by the end of this year.” As of October 28th, Teva had 145 products awaiting FDA approval, including 41 tentative approvals. The branded products of these applications had annual U.S. sales of over $96 billion. With that being said, being the largest global generic drug maker, Teva will benefit immensely from not only the large number of patent expiration going forward, but also from the newly elected President, Barack Obama. The President is pushing strongly towards cheaper alternatives to branded drugs, and Teva is in a great position to reap the benefits.
-Ryan Savitz
Disclosure: None
The Following Stocks Were Mentioned In This Article: SNY, TEVA
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