Teva earnings come up short and path to future rockier than before

Teva CEO Jeremy Levin

Jeremy Levin, CEO of Teva Pharmaceutical Industries ($TEVA), last year laid out an aggressive 5-year plan to cut costs, move away from its heavy reliance on generic drugs and turn out a version of its multiple sclerosis drug he said would offset the generic attack on Copaxone, its foundational product. But Levin, in addressing a disappointing quarter, had to acknowledge Thursday that his plans may not play out as he had anticipated after a U.S. appeals court last week invalidated the patent on Copaxone.

"We have been preparing for a generic launch of Copaxone," Reuters says Levin told analysts after second-quarter earnings fell short of expectations. "We are not sure of a generic timing or approval." If the ruling stands, Copaxone will face generic competition in May 2014, a year ahead of Teva's expected patent loss.

That is a huge deal for Teva, given that Copaxone brings in more than 20% of its sales and makes up about half of its earnings. It sold $1.1 billion in the second quarter, an increase of 9% from a year ago, but it wasn't enough to overcome other issues. The Israeli drugmaker's second-quarter net revenue, at $4.92 billion, fell short of its forecast of $4.94 billion. It earned $1.20 per share after accounting for one-time items, down from $1.28 a year earlier.  

Levin tried to remain upbeat, saying, "Teva is a different company than it was one year ago; I have great confidence in where the company is and in its future."

But for analysts, the emphasis is on the word "future." The here and now appears more uncertain. "This is a work in progress," Canaccord Genuity analyst Randall Stanicky told Reuters. "They are headed in the right direction but they have headwinds to face."

Investors have known for years that Teva was going to face a tough time when Copaxone finally fell to generic competition. That was one of the reasons the board brought Levin in last year. He has set out a plan to cut a couple of billion dollars out of the company's costs by streamlining Teva's manufacturing and supply chain and reducing headcount. Teva also expects to launch a longer-acting version of its flagship drug in 2014. It had expected to have a year to get it established before losing patent protection on the current version of Copaxone. Now that looks unlikely.

If the FDA does approve the new version, Levin said the company is ready "with an aggressive launch strategy for the first half of 2014." But in the meantime, it has other worries as well. Copaxone faces new competition, including oral treatments that are obviously easier to use than Copaxone injections.

- here's the earnings release
- read the Reuters story

Special Reports: Copaxone - Top 20 Orphan Drugs by 2018 | Teva - Pharma Stocks 2012: 5 Biggest Winners, 5 Biggest Losers

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