On a day that Teva chairman Sol Barer described as “the beginning of the next chapter for our company,” all analysts got was more of the same.
For the third time in the last four quarters, the company slashed its guidance, bringing its expected revenue range down to $22.2 billion to $22.3 billion from $22.8 billion to $23.2 billion. Teva’s non-GAAP earnings per share forecast sank to $3.77 to $3.87, a big step-down from its previous projection of $4.30 to $4.50, while it edited its cash flow from operations numbers by more than $1 billion, to $3.15 to $3.3 billion from $4.4 billion to $4.6 billion.
The reason for the tweaks? One, new competition for multiple sclerosis star Copaxone, which rolled out last month in the form of a 40 mg copy from Mylan. And two, even more pressure on the generics side at a time when the entire copycat industry is struggling. Thanks so the consolidation of purchasers, erosion on Teva’s based business reached 10%, up from 6% last quarter.
But the company also outlined slower-than-expected generics launches; it now thinks its 2017 generics newcomers will kick in $400 million in revenue instead of the $500 million to which it previously guided.
Once again, the forecast revisions met with criticism from analysts, including Goldman Sachs’ Jami Rubin, who quipped that she couldn’t even keep track of the number of quarters they’d “had this steady cadence of earnings downgrades.”
“It’s kind of uncanny,” she said, adding that “it seems that some of this ... may be due to the fact that the internal systems are not where they should be, not where the rest of the industry is.”
While interim CFO Mike McClellan attributed some of the company’s guidance difficulties to “lack of visibility in this incredibly changing environment,” he did concede that “clearly, we need to take a look at our internal valuations and our approach to how we’re looking at the future and try to get sharper.”
That’s just one challenge ahead for new CEO Kåre Schultz, who took Teva’s helm yesterday. “This will be a long road ahead for Teva,” Evercore ISI analyst Umer Raffat wrote of the generics issues.
As Barer stressed on the call, though, Schultz is “the best person to lead Teva now and well into the future,” and he reassured investors that Teva’s board—which has a history of CEO interference—wouldn’t prevent Schultz from doing just that.
“Kåre will be the leader of this company, and I am very confident in terms of what he’s going to do,” Barer said, adding that “I’m not worried about any sort of dynamics, political or whatever, that would stand in the way.”
For the quarter, Teva reported top- and bottom-line figures that each missed consensus slightly, with revenue checking in at $5.61 billion—a hair below $5.62 expectations—and EPS of $1.00 that hit below Wall Street’s $1.04.