Investors looking for more color on Teva Pharmaceuticals' (TEVA 2.25%) pursuit of Mylan (MYL +0.00%) didn't get it on Teva's first quarter conference call. The company said it's committed to buying Mylan -- even though the generic drugmaker rebuffed its $82 per share offer -- but Teva's management refused to take any questions on the subject.
Numbers-wise, the drugmaker posted a slight revenue decline of 0.4% compared to the year-ago quarter, with revenue coming in just shy of $5 billion. Like most international companies this earnings season, the strengthening dollar hurt revenue, which would have increased 6.6% year-over-year at constant currency.
Revenue from the company's generic drug business, which makes up just over half Teva's sales, increased 9% year over year. Profit from the segment increased a whopping 59% thanks to lower costs -- the stronger dollar works in Teva's favor on the cost side -- and its launch of generic Nexium, which can be priced higher -- and thus has a higher profit margin -- because it's the only generic on the market. Unfortunately that won't last forever, but Teva has other opportunities, such as its generic version of Abilify that was launched this week.
Teva's specialty medicines didn't fare nearly as well, falling 7% year over year because of the stronger dollar and lower Copaxone sales, which dropped 14% year over year. That Copaxone sales drop isn't quite as bad as it sounds because the comparison numbers are clouded due to stocking in the first quarter of 2014 when the company launched its three-times-a-week version of Copaxone. The less frequent version made up 66% of U.S. prescriptions for Copaxone, which should help soften the blow when Novartis and Momenta Pharmaceuticals launch their generic version of daily Copaxone, which gained FDA approval this month.
At the bottom line, adjusted earnings increased 11% year over year in the first quarter to $1.36 per share. But the more impressive number was the growth in cash from operations, up 51% year over year, giving Teva the option of growing through acquisitions, buying back shares, and returning profits to shareholders through its dividend. And it's doing all three.
In addition to the potential acquisition of Mylan, which would create a giant generic-drug business that could leverage economies of scale in a low margin business, Teva is also adding to its specialty drug business through acquisitions. In March, Teva announced plans to buy Auspex Pharmaceuticals to gain control of Auspex's SD-809, which treats involuntary movements in patients with Huntington's and other diseases.
In the first quarter, Teva used about $400 million to repurchase approximately 8 million shares. The company will spend another $288 million on the dividend declared for this quarter, which works out to $0.34 per share.
Total dividends represent payment of the dividend declared for the quarter. Current quarter data is an estimate. Source: Teva Pharmaceuticals.
Despite the currency headwind and the potential for an earlier-than-expected launch of generic Copaxone, management raised its 2015 guidance by $0.05 on either side of the range to between $5.05 and $5.35 per share.
