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Teva Pharmaceutical Industries Ltd.'s Q3 Helped by Actavis Generics Deal -- but Not Quite Enough

By Keith Speights – Nov 15, 2016 at 6:04AM

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The generic and specialty drugmaker posts big jumps in revenue and earnings thanks to its acquisition earlier this year of Actavis' generics business.

It's been a tough year for generic drugmakers. Teva Pharmaceutical (TEVA -1.05%) is no exception, with its stock down nearly 40% year to date. Teva announced its third-quarter earnings results before the market opened on Tuesday. Unfortunately, those results weren't enough to spark a comeback for the maker of generic and specialty drugs. Shares slipped 3% in pre-market trading. Here are the highlights from Teva's third quarter.

Image source: Getty Images.

Teva results: The raw numbers


Q3 2016 Actuals

Q3 2015 Actuals

Change (YOY)


$5.56 billion $4.82 billion 15.4%

Net income (loss)

$412 million $103 million 300%

Net income (loss) per diluted share

$0.35 $0.12  191.7%

YOY = year over year. Data source: Teva.

What happened this quarter?

Teva's acquisition of Actavis' generics business made a huge difference in the company's third-quarter results. Were it not for the $887 million in additional revenue resulting from this deal, Teva would have posted a year-over-year decline in revenue.

Generic drug revenue for the third quarter totaled $2.9 billion, a 32% increase from the prior year period -- thanks primarily to the Actavis acquisition. The deal also helped boost gross profit for the segment to $1.5 billion, up 46% from the third quarter of 2015.

However, the Actavis transaction didn't help Teva's specialty drug segment. Specialty drug sales fell 6% year over year to $2 billion. Sales for multiple sclerosis drug Copaxone slipped 2% from the prior-year period, coming in at $1.06 billion. The only major specialty drugs sold by Teva that posted higher sales from the same quarter last year were Parkinson's disease treatment Azilect with a 10% year-over-year gain and respiratory drug QVAR with a 4% increase from the prior-year period.

The only bright spot for Teva's specialty drug sales came from Europe. While U.S. specialty sales dropped 8% year over year to $1.6 billion, European sales grew 10% from the prior year period to $406 million. Teva reported specialty drug sales in the rest of the world of $84 million, a 22% year-over-year decline.

What management had to say

Erez Vigodman, Teva's president and CEO, said:

This has been a year of transition for Teva, underscored this quarter by the close of our strategic acquisition of Actavis Generics, which had significant contribution to our results. Actavis will continue to contribute in a meaningful way to the future growth of our generics business through the strengthened R&D capabilities and complementary pipeline and portfolio, and enhance our leadership in an increasingly evolving industry. 

Looking forward

Teva now expects full-year 2016 revenue to be between $21.6 billion and $21.9 billion. The company projects fourth-quarter revenue will be between $6.2 billion and $6.5 billion. Non-GAAP earnings per share for full-year 2016 are expected to be between $5.10 and $5.20. Teva projects fourth-quarter non-GAAP earnings per share of $1.34 to $1.44.

The primary challenge for Teva will be to turn its specialty drug business around. Two primary keys to making that happen are the company's anti-CGRP product for migraine headaches and experimental pain drug fasinumab.

Teva gained rights to fasinumab by paying Regeneron $250 million up front. The two companies are splitting development costs and eventual profits equally. Although Teva's cash stockpile is a lot lower now than it was at the beginning of the year due to the Actavis acquisition, don't be surprised if the company forges more deals in the future like the one with Regeneron to help jump start specialty drug sales.

Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Teva Pharmaceutical Industries. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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