Sometimes, where a revenue increase comes from is just as important as how much it increases. For generic-drug maker Teva Pharmaceuticals (NASDAQ:TEVA), the growth wasn't quite as exciting as the company's top line might suggest.
Total sales rose 18% year over year, but only about a third of that was organic growth. Another third came from the effects of the declining dollar, while the last third came from a change in selling Copaxone, something I'll cover in a moment. Let's get the rest of the sales figures out of the way first.
Sales in Europe were up 25% and 37% for the rest of the world -- mostly Russia and Latin America. However, combined, they compose less than 45% of the total. In North America, sales were up a respectable 11% thanks to recent generic launches. These include versions of GlaxoSmithKline's (NYSE:GSK) and Biovail's antidepressant drug Wellbutrin, as well as Johnson & Johnson's (NYSE:JNJ) antipsychotic Risperdal. Finally, sales of its branded multiple sclerosis drug Copaxone also helped Teva's earnings.
This last part is both good and bad. Teva ended its partnership with Sanofi-Aventis (NYSE:SNY) to market Copaxone in North America, so it now records all the sales of Copaxone there -- that's good. However, it still has to pay Sanofi a fee of 25% of sales for the next two years, which is going to be a large drag on earnings, especially this quarter. Operating income was essentially flat over the second quarter of last year, and only lower taxes allowed Teva to increase its earnings per share by 3%.
As a side note, Biogen Idec (NASDAQ:BIIB) claims that the largest group of patients switching to Tysabri, which it markets with Elan (NYSE:ELN), are coming off of Copaxone, but that doesn't seem to have hurt Teva's sales.
The reclassification of Copaxone sales will complicate year-over-year comparisons for a while. Even without that, though, investors could expect some difficulty here. Teva is planning on closing the acquisition of Barr Pharmaceuticals (NYSE:BRL) by the end of this year.
While the merger is probably a good thing in the long run, Teva's going to have to show me some better growth on the bottom line, and shore up its patent dispute over Copaxone, before I'll jump in.
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson and Glaxo are selections of the Income Investor newsletter. The Fool's disclosure policy is far from generic.
