Teva may have had a 'mediocre' Q3, but some analysts expected worse

Teva's third-quarter revenue haul missed consensus estimates by 2.5%.

Teva’s third quarter wasn’t all that pretty. But on the bright side, it didn’t too badly disappoint analysts, who already expected the company's sales to come up lagging.

Revenue of $5.56 billion missed consensus estimates by 2.5%. But the way Bernstein analyst Ronny Gal sees it, the “mediocre” quarter was “actually not that bad” given the “low expectations” surrounding the company.

What’s to blame for Wall Street’s lack of faith? In part, “carnage” in the generics sector for the quarter. Teva had already warned that volume decline and price erosion were taking a major toll on the industry, along with ambitious plans to buck the trend.

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Its recent swallowing of Allergan’s generics unit left Teva looking like it would be even more exposed, too, but as Evercore ISI analyst Umer Raffat wrote in his own Tuesday research note, the newly inherited portfolio “fared decent.”

The way Barclays analyst Doug Tsao sees it, Teva’s generics scale will eventually help it succeed in an “evolving” landscape, he wrote to clients. But the question is when that’ll happen. The company has already indicated that it won’t be the fourth quarter; it lowered the midpoint of its 2016 guidance by about $500 million, Gal noted, taking it down to $21.75 billion.

In the meantime, though, Teva will need to stay on top of its key launches, “especially if the fragile-at-best pricing environment weakens,” Tsao cautioned.

And that’s a critical task Teva’s generics CEO, Siggi Olafsson, is well aware of. In September, he told investors that the company intends to roll out 1,500 products per year that grow yearly revenue by about 10%—in other words, four launches for every day of 2017.

“We cannot miss a beat in that,” he said at the time.

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