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Cuts help Teva raise profits, despite flat sales

Earnings attributed largely to firm’s generics business

Teva Pharma logo

Plant closures and job cuts helped Teva post higher-than expected profits in the third quarter, though sales were flat at $5.1bn.

Much of the earnings gain came from the Israeli company's generics business, which boosted gross profits 10% thanks to reduced manufacturing costs and an ongoing initiative to strip inefficiencies out of the company's supply chain.

Teva expects to trim $650m off its cost base this year as part of a programme to reduce expenses by $1.3bn by the end of 2017, with nine facilities already in the process of being closed or sold off and the future of five more under consideration. It has also slimmed down its R&D operations.

As ever the primary focus of the quarterly results was on sales of multiple sclerosis drug Copaxone (glatiramer acetate), which is far and away Teva's biggest-selling drug but could face competition imminently in the US if an ongoing lawsuit currently at the US Supreme Court does not go the company's way.

After a 12% dip last quarter attributed to the impact of competition from oral MS therapies such as Biogen Idec's Tecfidera (dimethyl fumarate), Copaxone held up well with a 5% sales increase to $1.1bn, although competition is now nipping at the edges of the franchise with a generic already approved for sale in Argentina.

Teva is in the process of analysing the generic and said it will submit the findings as part of its latest Citizen's Petition (CP) in the US trying to block the entry of Copaxone clones, which is due for a verdict around the end of next month. Meanwhile, victory in the Supreme Court could protect the franchise until September next year.

Teva's specialty medicines business also benefitted from the introduction of biosimilar filgrastim (G-CSF) products Lonquex and Granix, which have captured market share of around 10% in the markets they have been launched in and helped Teva's cancer drug sales rise 19% to $299m in the third quarter.

Generic revenues fell 2% to $2.4bn, with the decline partially offset by gains for the company's active pharmaceutical ingredient (API) unit, which sells ingredients to other generics companies.

The company raised its outlook for full-year earnings per share $5.00-$5.10 from $4.90-$5.10, but only if there is no Copaxone competition this year. If a generic is approved in the US it would reduce operating income by $40m-$50m a month, it added.

"The effort we have put forth thus far in 2014 towards solidifying our foundation to drive organic growth is reflected in our strong third quarter results," said Teva chief executive Erez Vigodman, a corporate turnaround specialist who was brought in to replace former CEO Jeremy Levin earlier this year.

"We delivered improvement in profitability in all businesses, particularly in global generics, which saw profitability increase by 40% year over year," he added.

Article by
Phil Taylor

31st October 2014

From: Sales

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