After a stellar 2006 because of exclusive launches of some big-time generics, it seemed like Teva Pharmaceuticals (Nasdaq: TEVA) would have a heck of a time keeping the pace up in 2007.
Apparently, that fear was unwarranted. Revenue rose 12% year over year, thanks largely to the 28 new generic products it launched in the U.S. this year, and the 21% year-over-year increase in U.S. sales of its multiple sclerosis drug, Copaxone. That's pretty impressive growth, given how well a newcomer to the MS market, Elan's (NYSE: ELN) and Biogen Idec's (Nasdaq: BIIB) Tysabri, has been selling.
Starting next quarter, Teva will take over marketing Copaxone in the U.S. and Canada by itself. The change won't have much of an effect on the bottom line for two years since Teva will have to pay Sanofi-Aventis (NYSE: SNY) 25% of sales and absorb some additional costs in its neuro marketing expenses. After the payments are finished in early 2010, though, Teva should see a nice bump in net income.
Teva was pretty mum about the launch of its generic version of Wyeth's (NYSE: WYE) and Nycomed's heartburn medication, Protonix, only saying that it had captured 68% of new generic prescriptions, and that it hadn't relaunched because of "commercial considerations" after Wyeth broke off talks and launched its own generic version.
"Commercial considerations" could mean that Teva's initial launch was large enough to supply pharmacies for quite a while, and selling additional tablets -- now at a reduced price thanks to the added competition -- just doesn't make financial sense. In addition, management sees other opportunities, namely Prevacid and Donepezil, to "go after."
While the sales increases are impressive, the bottom-line growth was a little more generic, with 2007 earnings per share up just 3% compared to last year's adjusted EPS. Increased expenses in both marketing and R&D dragged down the bottom line last year, but I think it's better to think of those costs as investments rather than expenses, since they should help Teva's earnings down the line.
The payoff may come pretty soon, since the company is expecting earnings-per-share growth of 9% to 16% this year, and at least another 9% growth in 2009. With 160 applications pending with the FDA, Teva's future growth looks far from generic.
