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Did Teva Pharmaceutical Turn the Corner in Q4?

By Keith Speights - Feb 16, 2016 at 10:59AM

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Declining revenue and earnings don't tell the full story for this big generic and specialty drugmaker.

Image source: Teva. 

Sales and earnings have been declining for Israel-based drugmaker Teva Pharmaceutical Industries Ltd. (TEVA 4.92%). However, headed into the fourth quarter, the company expressed optimism, raising estimates for both revenue and earnings. Teva reported those fourth-quarter results last Thursday. Has the company now turned the corner financially?

Teva results: The raw numbers


Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)


$4.881 billion

$5.168 billion


Net Income From Continuing Operations

$500 million

$687 million


Adjusted Earnings Per Share




Data source: Teva.

What happened with Teva this quarter?
Teva's downward trend on both top and bottom lines continued in the fourth quarter. Contributing factors included:

  • Currency headwinds resulted in revenues in the fourth quarter falling $259 million below the same period in 2014.
  • U.S. generic drug revenue dropped 15% year over year, primarily due to declining sales of generic versions of Lovaza, Pulmicort, and Xeloda.
  • Specialty medicine revenue fell 6% compared to the fourth quarter of 2014, largely stemming from slowing sales of Copaxone and Azilect.
  • Cancer drug revenue slipped 5%, with sales of Treanda dropping 12%.

Despite these negatives, Teva did report some good news. Profitability with the company's European generics business is improving. Revenue outside of the U.S. and Europe increased by 5%. In terms of local currency, that increase was 18%.

Perhaps the most encouraging development for Teva is growth for its respiratory products. Overall respiratory product sales were up 29% year over year. Sales for ProAir increased 23% to $148 million for the quarter, while QVAR revenue jumped 55% to $119 million.

What management had to say
Erez Vigodman, president and CEO of Teva, focused on the positives. Vigodman stated:

Our strong focus on solidifying the foundation of Teva and improving the fundamentals of our business is manifesting itself in the consistent improvement of our operating and financial results. Once the company was put on solid footing, we took the offensive, and through a series of compelling acquisitions, partnerships, and bold strategic moves, we are transforming Teva.

Vigodman also referred to "building a new company with a solid foundation." While Teva's revenue and earnings have been trending downward, he says that the company is "positioned to offer top line and bottom line growth."

Looking forward
Teva won't give full-year guidance until after the close of the acquisition of Actavis Generics from Allergan (AGN), but the company did provide first-quarter 2016 guidance. Teva expects revenue between $4.7 billion and $4.9 billion in the first quarter, with non-GAAP earnings per share between $1.16 and $1.20.

The Allergan deal will be a primary focus for Teva in the months ahead. It's a $40.5 billion bet on transforming the company. Teva has previously announced that it expects double-digit increases in non-GAAP earnings per share in 2016 from the deal. The company also thinks gaining Actavis Generics will help it establish a dominating presence in the generic drug market.

Other recent deals could make a difference as well. In October, Teva announced plans to buy Mexican drugmaker Rimsa for $2.3 billion. Less than two months later, the company forged a partnership with Takeda to form a new venture targeting the Japanese market.

Teva's fourth-quarter results don't seem to indicate that the company has turned the corner just yet. And it's too soon to know if the deals with Allergan and others will pay off. However, one thing is certain: Teva isn't standing still.


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