Specialty Drug Sales Give Teva Pharmaceutical Industries Ltd. a Boost in Q2

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It hasn't been the greatest year so far for Teva Pharmaceutical Industries (TEVA) shareholders. The drugmaker's stock is down over 18% year to date and has been stuck at that level or lower for the past three months.

Teva announced its second-quarter results before the market opened on Thursday. Were those results good enough to light a fire under the stock? Here are the highlights.

Teva results: The raw numbers

YOY = Year over year. Data source: Teva.

What happened with Teva this quarter

Teva's revenue continued to be negatively impacted by currency headwinds in the second quarter. The company noted that revenue for the quarter would have been up 4% year over year excluding the impact of currency fluctuations.

Non-GAAP earnings for the second quarter were $1.23 billion, essentially flat compared to the prior-year period. Teva reported second-quarter non-GAAP earnings of $1.25 per diluted share, down from the $1.45 per diluted share posted in the same quarter last year because of issuance of more shares since then. However, the company's non-GAAP earnings topped investors' expectations.

Generic revenue fell 33% year over year. Loss of exclusivity for generic versions of Abilify, Nexium, and Pulmicort had the biggest impact on revenue from generics. Lower sales for these drugs also largely accounted for an 11% decline in gross profit for Teva's generic medicines business.

The good news came from specialty pharmaceuticals. Teva reported specialty drugs revenue increased 9% year over year, to $2.3 billion. The biggest moneymaker continued to be Copaxone, which saw sales climb 8% from the prior-year period, to $1.14 billion, thanks in part to lower Medicaid rebates. Teva's rising star, though, is QVAR. Sales for the respiratory drug jumped 40% year over year.

What management had to say

Erez Vigodman, Teva's president and CEO, focused primarily on his company's position for the future. Vigodman stated:

We are pleased with our performance this quarter and the steps we are taking to transform our business, notably the recent completion of our acquisition of Actavis Generics and the proposed purchase of Anda Inc. We have brought together two leading businesses with complementary strengths, R&D capabilities, product pipelines and portfolios, geographical footprints, operational networks and cultures. The result is a stronger, more competitive Teva, well positioned to thrive in an evolving global marketplace.

Looking forward

Teva projects that revenue for 2016 should be between $22 billion and $22.5 billion. The company expects full-year non-GAAP earnings per share between $5.20 and $5.40. Both ranges are in line with what Wall Street expects for 2016.

Much of Teva's future success hinges on how well it integrates the businesses that it has acquired -- and will soon acquire -- from Allergan (AGN). Teva closed its deal to buy Allergan's generics business unit on Aug. 2. The next day, the Israel-based drugmaker announced plans to also buy Allergan's Anda, Inc., the fourth-largest distributor of generic drugs in the U.S.

The first deal with Allergan came at a price tag of over $40 billion. That makes the cost of Anda seem small by comparison at only $500 million. Teva expects to gain around $1.4 billion annually from cost synergies. The company also anticipates non-GAAP earnings-per-share gains of 14% in 2017 and 19% in 2018.

Integration of the Allergan business could transform Teva. Investors will want to watch for any hiccups with assimilation of the new units. Its important to keep an eye also on how effectively Teva manages the debt it took on to fund the Allergan generics purchase. If the company accomplishes what it says it will, though, these recent acquisitions should bode well for Teva's future.