Teva Pharmaceutical Industries, the world's biggest generic drugs maker, reported improved quarterly results, boosted by the speedy integration of Barr Pharmaceuticals, and forecast stronger growth in the second half of 2009. First quarter earnings beat analysts' forecasts but the increase in sales was slightly below expectations mainly due to the dollar's appreciation, which knocked $200 million off the top line.
Following its purchase of rival Barr in December, Israel-based Teva was in the market for more acquisitions, Chief Financial Officer Eyal Desheh told Reuters on Tuesday. He said the first quarter, which included Barr results for the first time, was expected to be the weakest this year for launches of new products.
"The fourth quarter is supposed to be the most active in new launches and in between we expect improvement from one quarter to the next," he said. Desheh said Teva was seeing only marginal impact from the economic slowdown, and this was being offset by customers favouring generic drugs over more expensive branded products.
J.P. Morgan analyst Chris Schott said he expected a solid remainder of 2009 as the Barr integration gains traction and saw faster earnings growth in 2010. "We continue to view Teva as ideally positioned based upon the company's extensive product offering, patent challenge portfolio, vertical integration and geographic reach," he said. Teva's Nasdaq-shares were down 1.5 percent at $43.46 at 1404 GMT compared with a year high of $48.74.
Excluding one-off items related mainly to the acquisition, net profit rose 4 percent to $634 million while earnings per share fell 4 percent to 71 cents. The decline in EPS was due to higher financial expenses, tax rate and share count resulting from the acquisition. Sales increased 22 percent to $3.15 billion. Analysts on average forecast Teva would earn 68 cents a share on sales of $3.37 billion, according to Reuters Estimates.
"We tend to disregard the weakness on Teva's generic revenue line," Sanford Bernstein analyst Aaron Gal said. "This is the first quarter after an acquisition." In a conference call with analysts, Teva President and Chief Executive Shlomo Yanai maintained the company's outlook for EPS excluding items of $3.20 to $3.40 in 2009 on sales between $14.1 billion and $14.6 billion.
He still sees earnings growth of 30-35 percent in 2010. Teva's Copaxone was the number-one multiple sclerosis drug globally in the first quarter with record sales of $621 million, up 15 percent from a year ago. Yanai said Teva had excellent sales of products from Barr's women's health franchise, which rose 39 percent in the quarter mainly due to strong sales of the 'morning-after' pill.
"The Barr integration is proceeding ahead of schedule, and we now believe that we will derive even more value from this acquisition than we originally expected," he said. Teva declared a dividend of 0.60 shekel (14.4 cents) a share to be paid on May 27, up from 0.45 shekel a year earlier.