Teva Has Good Year But Fails to Meet Ambitious US$14.1-bil. Topline Guidance for 2009

Teva's 2009 Results

Generic giant Teva (Israel) has reported annual results for 2009, with sales increasing to US$13.9 billion, up year-on-year (y/y) by 25.4%. As usual, formulation sales lead revenues over the period and contributed to 96% of topline; active pharma ingredient sales contributed to the remaining 4% of sales. Geographically, North America continues to be the leading revenue generator, contributing 62% of the year's total sales. European revenues contributed 23% of sales over the 12 months in question, with the Barr Laboratories (U.S.) acquisition boosting revenues from Poland, France, Germany, and Hungary. Similarly "Rest of World" revenues were boosted by Barr's Russian operations. Sales for this segment were also boosted by Teva's foothold in Latin America and Israel, and Rest of World sales contributed to the remaining 15% of sales over 2009.

In terms of proprietary portfolios, once again multiple-sclerosis drug Copaxone (glatiramer acetate) leads sales by quite a margin. Sales of the drug for 2009 stood at US$2.8 billion, up y/y by 25%, with U.S. sales contributing to 67.8% of the product's revenues. Azilect (rasagiline) sales for the year stood at US$243 million, a 39% increase y/y. The respiratory portfolio's annual revenues for 2009 were US$898 million (a 15% increase y/y), with growth attributable to strong ProAir HFA (albuterol sulphate inhalation aerosol) and Qvar (beclometasone dipropionate inhaler) sales. The women's health portfolio—acquired as part of the Barr acquisition—achieved sales for the 12 months of US$319 million (up y/y by 12%). This was on account of strong Seasonique (ethinyl estradiol and levonorgestrel) sales offsetting weak Plan B One Step (levonorgestrel) sales.

Cost of sales, selling, and marketing, and general and administrative expenditure for the year grew y/y by 27.7%, 45.3%, and 23% respectively. R&D expenses, on the other hand, decreased y/y by 62.3%, however, this was only because acquired in-process R&D has been included in the calculation. Without the latter, R&D expenses actually increased marginally by 1.9% y/y over the same period. Operating and net profits for the year stood at US$3 billion and US$2 billion respectively, with growth rates jumping by 140 % and 226% y/y respectively.

Teva's sales for the last three months of 2009 grew y/y by 33.5%. Operating and net income stood at US$887 million and US$380 million; growth rates are not calculable given that the firm reported losses on both these indicators in 2008.

Outlook and Implications

Teva has had a good 2009, owing to Barr Labs' integration leading to a boost in sales in several markets, including the United States, Poland, Germany, Croatia, and Russia and the addition of a women's health portfolio (albeit small) into the former's proprietary portfolio. However, in spite of this, the firm has not met its pre-set annual guidance of US$14.1 billion in sales. This is because fourth-quarter sales have failed to reach the approximately US$5 billion needed to make up for the shortfalls in previous quarters. However, fourth-quarter revenues have benefited from the sales of Prevacid Delayed-Release, Allegra-D 12-Hour, and the re-launch of Pulmicort Respules. Profits over this three-month period have, however, been hit by the US$315-million Medicaid settlement.

Over 2010, synergies with Barr are likely to increase, with the firm's expansion strategies in Japan and the potential commercialisation of newer proprietary drugs (currently in the last stage of development) set to further boost sales. Guidance for 2010, is not yet available, with the firm yet to hold its annual results conference call.