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TEVA Q1 Earnings Miss, Schizophrenia Study Meets Goal, Stock Up
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Teva Pharmaceutical Industries Limited (TEVA - Free Report) reported first-quarter 2024 adjusted earnings of 48 cents per share, which missed the Zacks Consensus Estimate of 51 cents per share. Earnings rose 20% year over year on a reported basis and 18% on a constant currency basis.
Revenues for the first quarter came in at $3.82 billion, which beat the Zacks Consensus Estimate of $3.7 billion. Total revenues rose 4% on a reported basis and 5% on a constant currency basis. Sales growth was mainly driven by higher revenues from generic products globally and the branded drug Austedo.
Revenue growth was partially offset by lower revenues from the Anda distribution business in the United States segment and lower sales of Copaxone.
Segment Discussion
Sales in the United States segment (previously the North America segment) were $1.73 billion, up 3% year over year, driven by higher sales of generic products and Austedo and Ajovy. The uptick was partially offset by lower sales of certain legacy brands like Copaxone, Bendeka/Treanda and Anda. United States revenues missed the Zacks Consensus Estimate of $1.77 billion as well as our model estimate of $1.78 billion.
Generic/biosimilar product revenues rose 8% from the year-ago period to $808 million in the United States segment due to increased revenues from a generic version of Revlimid, partially offset by increased competitive pressure. Generic revenues missed our model estimate of $853 million as well as the Zacks Consensus Estimate of $816 million.
In February, Teva and partner Alvotech announced FDA approval of Simlandi injection, a biosimilar version of AbbVie’s (ABBV - Free Report) blockbuster immunology drug Humira. Simlandi injection is the first interchangeable high-concentration, citrate-free biosimilar to AbbVie’s Humira. Simlandi is expected to be launched in the second quarter. In April, the FDA also approved Teva and Alvotech’s Selarsdi, a biosimilar version of J&J’s (JNJ - Free Report) blockbuster immunology drug, Stelara. Per a settlement with J&J, Selarsdi is expected to be launched in February 2025.
Huntington's disease drug, Austedo, recorded sales of $282 million in the United States, up 67% year over year. Sales were mainly driven by volume growth as prescription trends continued to grow. The launch of Austedo extended-release tablets, its once-a-day formulation, in May 2023 boosted volumes. Austedo sales beat our model estimate of $226 million as well as the Zacks Consensus Estimate of $239 million.
Ajovy recorded sales of $45 million for the quarter, flat year over year. Ajovy sales missed our model estimate of $59.3 million as well as the Zacks Consensus Estimate of $57 million.
Copaxone recorded sales of $30 million in the United States, down 58% year over year, due to generic competition and a decrease in glatiramer acetate market share because of the availability of alternative therapies. Copaxone sales missed our model estimate of $61.5 million as well as the Zacks Consensus Estimate of $60 million.
Combined sales of Bendeka and Treanda declined 26% from the year-ago quarter to $46 million. Sales of Bendeka and Treanda were hurt by generic erosion. Teva lost orphan drug exclusivity for bendamustine products in December 2022.
Distribution revenues generated by Anda declined 10% year over year in the quarter to $381 million due to lower demand.
The Europe segment recorded revenues of $1.27 billion, up 7% year over year on a reported basis. Sales were up 4% on a constant currency basis. Europe revenues beat the Zacks Consensus Estimate of $1.21 billion as well as our model estimate of $1.18 billion.
Generic product revenues in Europe rose 5% in constant currency terms to $1.0 billion, driven by higher volumes. Copaxone sales declined 5% to $57 million. Ajovy revenues increased 40% on a constant currency basis to $51 million, driven by higher volumes.
In the International Markets segment, sales rose 3% year over year to $597 million. In constant currency terms, sales increased 17% from a year ago, driven mainly by higher generic revenues. International Markets revenues beat the Zacks Consensus Estimate of $484 million as well as our model estimate of $500 million.
Generic product revenues rose 16% in constant currency terms to $477 million, mainly driven by price increases, which led to higher revenues in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan. Copaxone sales were $12 million compared with $17 million in the year-ago quarter. Ajovy revenues were $17 million compared with $13 million in the year-ago quarter.
The Other segment (comprising the sales of active pharmaceutical ingredients [API] to third parties and certain contract manufacturing services) recorded revenues of $225 million, up 3% year over year on a reported basis and 2% on a constant currency term.
Margin Discussion
Adjusted gross margin was 51.4% for the quarter, up 150 basis points (bps) year over year, mainly driven by favorable product mix and lower operational costs.
Adjusted research & development expenses rose 4% year over year to $242 million due to higher costs related to neuroscience (mainly neuropsychiatry) and immunology pipeline projects.
Selling and marketing (S&M) expenditure rose 11% from the year-ago level to $608 million. General and administrative expenses declined 6% from the prior-year level to $278 million.
Adjusted operating margin increased 200 bps to 23.4% in the quarter due to higher gross profit margins, partially offset by higher S&M costs.
Outlook for 2024 Maintained
Revenues are expected in the range of $15.7-$16.3 billion. This signals year-over-year growth of 2% to 6% from the 2023 level.
Teva expects adjusted EPS in the band of $2.20-$2.50 in 2024.
Teva expects margins to continue to improve, driven by continuous improvement in the portfolio mix. Adjusted gross margin is expected to be between 53% and 54% in 2024 and is expected to gradually improve throughout the year.
The company expects adjusted operating income in the range of $4-$4.5 billion. Teva expects adjusted EBITDA in the range of $4.5-$5 billion.
Schizophrenia Study Meets Goal
Along with the earnings release, Teva also announced positive data from a phase III study called SOLARIS on its key pipeline candidate, olanzapine, a long-acting subcutaneous injectable (LAI) for treating schizophrenia. The study met its primary and secondary endpoints on all dose groups versus placebo.
Data from the study showed that olanzapine LAI led to a clinically meaningful and statistically significant reduction in the Positive and Negative Syndrome Scale (PANSS) total score, the study’s primary endpoint, across all three dose groups versus placebo. PANSS is a widely used assessment tool for schizophrenia symptom severity. The mean change in PANSS versus placebo from baseline to week 8 was -9.71, -11.27 and -9.71 points for the high, medium and low dose arms, respectively.
The candidate was well tolerated with no incidence of post-injection delirium/sedation syndrome.
Our Take
Teva’s first-quarter results were mixed as it missed estimates for earnings but beat the same for sales. The strong performance of Austedo and Teva’s global generics business was encouraging. Its generics business sales increased by 9% in the quarter, driven by growth across all regions. Ajovy also registered a growth of 18% globally, mainly driven by strong performance in Europe and International Markets.
Teva’s shares were up almost 13% on Wednesday as the positive schizophrenia study news offset the mixed earnings performance. The encouraging data from the phase III study on olanzapine LAI demonstrates the candidate’s potential to be an effective long-acting treatment option for schizophrenia.
Year to date, shares of TEVA have risen 50.7% compared with the industry’s growth of 2.8%.
Image Source: Zacks Investment Research
Teva’s revenues have suffered significantly since it lost exclusivity of its key multiple sclerosis medicine, Copaxone, in 2015. However, Teva expects its newer drugs, Austedo, Uzedy and Ajovy, as well as a stable generics business, to help revive top-line growth in future quarters. With increasing contribution from biosimilars, Teva’s U.S. generics business is showing improved stability. Teva is saving costs and improving margins through the optimization of operations for efficiency while also lowering the debt on its balance sheet.
Teva plans to separate its API unit into a standalone business unit. The divestment is expected to be completed in the first half of 2025.
Zacks Rank and Stock to Consider
Teva currently has a Zacks Rank #3 (Hold).
Teva Pharmaceutical Industries Ltd. Price and Consensus
In the past 60 days, the Zacks Consensus Estimate for Ligand Pharmaceuticals has improved from $4.42 per share to $4.56 per share. For 2025, earnings estimates have improved from $5.11 per share to $5.27 per share in the past 60 days. So far this year, shares of LGND have risen 12.5%
Earnings of Ligand Pharmaceuticals beat estimates in each of the last four quarters. LGND delivered a four-quarter average earnings surprise of 56.02%.
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TEVA Q1 Earnings Miss, Schizophrenia Study Meets Goal, Stock Up
Teva Pharmaceutical Industries Limited (TEVA - Free Report) reported first-quarter 2024 adjusted earnings of 48 cents per share, which missed the Zacks Consensus Estimate of 51 cents per share. Earnings rose 20% year over year on a reported basis and 18% on a constant currency basis.
Revenues for the first quarter came in at $3.82 billion, which beat the Zacks Consensus Estimate of $3.7 billion. Total revenues rose 4% on a reported basis and 5% on a constant currency basis. Sales growth was mainly driven by higher revenues from generic products globally and the branded drug Austedo.
Revenue growth was partially offset by lower revenues from the Anda distribution business in the United States segment and lower sales of Copaxone.
Segment Discussion
Sales in the United States segment (previously the North America segment) were $1.73 billion, up 3% year over year, driven by higher sales of generic products and Austedo and Ajovy. The uptick was partially offset by lower sales of certain legacy brands like Copaxone, Bendeka/Treanda and Anda. United States revenues missed the Zacks Consensus Estimate of $1.77 billion as well as our model estimate of $1.78 billion.
Generic/biosimilar product revenues rose 8% from the year-ago period to $808 million in the United States segment due to increased revenues from a generic version of Revlimid, partially offset by increased competitive pressure. Generic revenues missed our model estimate of $853 million as well as the Zacks Consensus Estimate of $816 million.
In February, Teva and partner Alvotech announced FDA approval of Simlandi injection, a biosimilar version of AbbVie’s (ABBV - Free Report) blockbuster immunology drug Humira. Simlandi injection is the first interchangeable high-concentration, citrate-free biosimilar to AbbVie’s Humira. Simlandi is expected to be launched in the second quarter. In April, the FDA also approved Teva and Alvotech’s Selarsdi, a biosimilar version of J&J’s (JNJ - Free Report) blockbuster immunology drug, Stelara. Per a settlement with J&J, Selarsdi is expected to be launched in February 2025.
Huntington's disease drug, Austedo, recorded sales of $282 million in the United States, up 67% year over year. Sales were mainly driven by volume growth as prescription trends continued to grow. The launch of Austedo extended-release tablets, its once-a-day formulation, in May 2023 boosted volumes. Austedo sales beat our model estimate of $226 million as well as the Zacks Consensus Estimate of $239 million.
Ajovy recorded sales of $45 million for the quarter, flat year over year. Ajovy sales missed our model estimate of $59.3 million as well as the Zacks Consensus Estimate of $57 million.
Copaxone recorded sales of $30 million in the United States, down 58% year over year, due to generic competition and a decrease in glatiramer acetate market share because of the availability of alternative therapies. Copaxone sales missed our model estimate of $61.5 million as well as the Zacks Consensus Estimate of $60 million.
Combined sales of Bendeka and Treanda declined 26% from the year-ago quarter to $46 million. Sales of Bendeka and Treanda were hurt by generic erosion. Teva lost orphan drug exclusivity for bendamustine products in December 2022.
Distribution revenues generated by Anda declined 10% year over year in the quarter to $381 million due to lower demand.
The Europe segment recorded revenues of $1.27 billion, up 7% year over year on a reported basis. Sales were up 4% on a constant currency basis. Europe revenues beat the Zacks Consensus Estimate of $1.21 billion as well as our model estimate of $1.18 billion.
Generic product revenues in Europe rose 5% in constant currency terms to $1.0 billion, driven by higher volumes. Copaxone sales declined 5% to $57 million. Ajovy revenues increased 40% on a constant currency basis to $51 million, driven by higher volumes.
In the International Markets segment, sales rose 3% year over year to $597 million. In constant currency terms, sales increased 17% from a year ago, driven mainly by higher generic revenues. International Markets revenues beat the Zacks Consensus Estimate of $484 million as well as our model estimate of $500 million.
Generic product revenues rose 16% in constant currency terms to $477 million, mainly driven by price increases, which led to higher revenues in most markets, partially offset by regulatory price reductions and generic competition to off-patented products in Japan. Copaxone sales were $12 million compared with $17 million in the year-ago quarter. Ajovy revenues were $17 million compared with $13 million in the year-ago quarter.
The Other segment (comprising the sales of active pharmaceutical ingredients [API] to third parties and certain contract manufacturing services) recorded revenues of $225 million, up 3% year over year on a reported basis and 2% on a constant currency term.
Margin Discussion
Adjusted gross margin was 51.4% for the quarter, up 150 basis points (bps) year over year, mainly driven by favorable product mix and lower operational costs.
Adjusted research & development expenses rose 4% year over year to $242 million due to higher costs related to neuroscience (mainly neuropsychiatry) and immunology pipeline projects.
Selling and marketing (S&M) expenditure rose 11% from the year-ago level to $608 million. General and administrative expenses declined 6% from the prior-year level to $278 million.
Adjusted operating margin increased 200 bps to 23.4% in the quarter due to higher gross profit margins, partially offset by higher S&M costs.
Outlook for 2024 Maintained
Revenues are expected in the range of $15.7-$16.3 billion. This signals year-over-year growth of 2% to 6% from the 2023 level.
Teva expects adjusted EPS in the band of $2.20-$2.50 in 2024.
Teva expects margins to continue to improve, driven by continuous improvement in the portfolio mix. Adjusted gross margin is expected to be between 53% and 54% in 2024 and is expected to gradually improve throughout the year.
The company expects adjusted operating income in the range of $4-$4.5 billion. Teva expects adjusted EBITDA in the range of $4.5-$5 billion.
Schizophrenia Study Meets Goal
Along with the earnings release, Teva also announced positive data from a phase III study called SOLARIS on its key pipeline candidate, olanzapine, a long-acting subcutaneous injectable (LAI) for treating schizophrenia. The study met its primary and secondary endpoints on all dose groups versus placebo.
Data from the study showed that olanzapine LAI led to a clinically meaningful and statistically significant reduction in the Positive and Negative Syndrome Scale (PANSS) total score, the study’s primary endpoint, across all three dose groups versus placebo. PANSS is a widely used assessment tool for schizophrenia symptom severity. The mean change in PANSS versus placebo from baseline to week 8 was -9.71, -11.27 and -9.71 points for the high, medium and low dose arms, respectively.
The candidate was well tolerated with no incidence of post-injection delirium/sedation syndrome.
Our Take
Teva’s first-quarter results were mixed as it missed estimates for earnings but beat the same for sales. The strong performance of Austedo and Teva’s global generics business was encouraging. Its generics business sales increased by 9% in the quarter, driven by growth across all regions. Ajovy also registered a growth of 18% globally, mainly driven by strong performance in Europe and International Markets.
Teva’s shares were up almost 13% on Wednesday as the positive schizophrenia study news offset the mixed earnings performance. The encouraging data from the phase III study on olanzapine LAI demonstrates the candidate’s potential to be an effective long-acting treatment option for schizophrenia.
Year to date, shares of TEVA have risen 50.7% compared with the industry’s growth of 2.8%.
Image Source: Zacks Investment Research
Teva’s revenues have suffered significantly since it lost exclusivity of its key multiple sclerosis medicine, Copaxone, in 2015. However, Teva expects its newer drugs, Austedo, Uzedy and Ajovy, as well as a stable generics business, to help revive top-line growth in future quarters. With increasing contribution from biosimilars, Teva’s U.S. generics business is showing improved stability. Teva is saving costs and improving margins through the optimization of operations for efficiency while also lowering the debt on its balance sheet.
Teva plans to separate its API unit into a standalone business unit. The divestment is expected to be completed in the first half of 2025.
Zacks Rank and Stock to Consider
Teva currently has a Zacks Rank #3 (Hold).
Teva Pharmaceutical Industries Ltd. Price and Consensus
Teva Pharmaceutical Industries Ltd. price-consensus-chart | Teva Pharmaceutical Industries Ltd. Quote
A top-ranked stock in the drug/biotech is Ligand Pharmaceuticals (LGND - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, the Zacks Consensus Estimate for Ligand Pharmaceuticals has improved from $4.42 per share to $4.56 per share. For 2025, earnings estimates have improved from $5.11 per share to $5.27 per share in the past 60 days. So far this year, shares of LGND have risen 12.5%
Earnings of Ligand Pharmaceuticals beat estimates in each of the last four quarters. LGND delivered a four-quarter average earnings surprise of 56.02%.