Troubled Teva walks 2017 guidance down by $1B-plus—and some say it may still be too high

Teva
Teva now expects to bring in between $23.8 billion and $24.5 billion in sales this year.

Last July, Teva laid out some financial expectations for 2017. Now, it’s revising those predictions—and they’re going way, way down.

On Friday, the company laid out a revenue forecast of $23.8 billion to $24.5 billion for the year, well below the $25.2 billion to $26.2 billion range it previously outlined. The Israeli drugmaker now expects EPS to hit between $4.90 and $5.30, another big drop from its July guidance of $6.00 to $6.50.

“I think it’s pretty clear that management’s prior expectations for 2017 were very inflated,” Evercore ISI analyst Umer Raffat wrote in a note to clients.

The reasons? For one, “a number of launches were not executed in 2016,” CEO Erez Vigodman told investors on a conference call.

Plenty of industry watchers—including Bernstein’s Ronny Gal, who called the July numbers “high”—saw a downward revision coming. “There is some degree of a ‘show me’ story based on Teva not having a very strong history of delivery,” he wrote at the time.

But the new set of targets is still “a tough picture,” Gal figures. If generics to Teva’s 40-mg version of Copaxone enter the market, the company predicts EPS will take a hit of between 65 cents and 80 cents. But Gal thinks it’ll be “more like a buck,” he said in an investor video. If knockoffs hit the scene early in the year, “we think this company’s going to go to about $4.00 of earning.”

Teva, meanwhile, will be working hard to defend its star moneymaker—one of five priorities Vigodman laid out for shareholders on the call. That set also includes squeezing as much cost savings out of its $40.5 billion deal for Allergan's generics unit as it possibly can, and Teva plans to have reaped $1.3 billion in cost cuts and tax savings by the time the year draws to a close.

“We know exactly what needs to be done,” Vigodman said of getting the company back on the right track.

Some investors, though, aren’t so sure. Many of them weren’t happy with the mammoth Allergan buy, and last month’s sudden departure of generics CEO Siggi Olafsson—a champion of the deal—cast more doubt on the transaction. Between the Allergan pickup and Teva’s other big recent buy—a pickup of Mexico’s Rimsa that went so awry that Rimsa’s founders sued Teva, accusing it of concocting false accusations of fraud to find a way out of the deal—some have come to wonder whether Vigodman is at fault.

Teva, though—which disputes Rimsa’s claims, arguing that Rimsa misled it—has faith in its head honcho, despite a rocky 2016. Under his leadership, “we have delivered on our promises and continued to execute a growth strategy that we believe will deliver value for patients and shareholders alike,” a company spokeswoman told FiercePharma in October.

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