"It was a strong quarter, in line with expectations or better. The market got a bit confused with the number of shares: we gave guidance according to an additional number of shares as a result of raising capital, and when you discount that, you see that net earnings per share were $1.32, while the analysts' estimate was $1.29," says Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) CFO Eyal Desheh. Teva released its 2015 final quarter and full year results on Thursday last week, and its share price fell 5%. The next day, it rose 3%.
Together with the financial statements, Teva published its 20F filing for 2015. At the same time, unusually for it, it provided quarterly rather than annual guidance. The annual guidance will be released after the huge deal for the acquisition of the generics division of Allergan is completed. "The deal is on track," says Desheh, "We are gearing up for closure at the end of March. It may perhaps drift a little into April, because there are many products that the US Federal Trade Commission has to examine, but that won’t take very much longer."
Has the turmoil on the markets made the deal more expensive?
"No. In fact bond interest rates have fallen since we announced the deal, so that the debt has certainly not become more expensive, we issued the shares at the price we estimated, and the price of the shares that will be transferred to Allergan is settled (the share component of the acquisition price, S. H-V.), so that all the parameters are fixed."
When will you raise the debt for financing the deal?
"As soon as there's more certainty, we'll do it. It will happen near the closure date of the deal, in this quarter or the next."
Revenue down
Teva had revenue of $4.88 billion in the fourth quarter, which was higher than the analysts' estimate, but 5.6% less than in the corresponding quarter. Excluding foreign currency differences, the decline was 1%. Sales of generics totaled $2.3 billion in the quarter. In ethical drugs, sales of Copaxone, Teva's brand treatment for multiple sclerosis, continued to be robust, despite 2015 being the first year in which Teva had to face generic competition against the original drug. Copaxone sales totaled $960 million in the quarter, down from $1.1 billion in the corresponding quarter, but with a gross profit margin of 90.2%, higher than the margin in the corresponding quarter, which was 89.4%. Teva managed to offset some of the fall in sales volume with higher prices. "Copaxone continues to be strong," says Desheh, "and we haven't yet started to see erosion. All in all, the decline reflects changes in distributors' stocks, and not a fall in demand. The number of prescriptions is the same, and there has been no decline in prices."
For the first quarter of 2016, Teva expects revenue of $4.4-4.9 billion, and non-GAAP earnings of $1.16-1.2 per share ($1.32-1.36 excluding the effect of capital raised). Teva sees cash flow of $1.2-1.3 billion from regular activities in the quarter. "Within a few weeks we'll have all the information, after we close the deals with Allergan and in Japan and Mexico, and we'll be able to provide complete guidance," Desheh says, "Our model has not changed. Teva built itself very well in 2014 -2015, and in 2016 we're starting to reap the fruits."
Teva's full report shows that it had 42,888 employees in 2015, 0.3% fewer than in 2014. In Israel, the workforce was stable at almost 7,000, while in the US there was a decline of 4% to 6,342. Teva granted its employees 1.5 million options at an exercise price of $56.8 in 2015. Employees sold 1.1 million shares last year at an average price of $41, representing a benefit of $22.2 million.
The report also reveals that Teva has ceased to develop Laquinimod for Crohn's Disease, and also development of growth hormone Albutropin.
Published by Globes [online], Israel business news - www.globes-online.com - on February 15, 2016
© Copyright of Globes Publisher Itonut (1983) Ltd. 2016