Teva Optimistic About Its Financial Future
Despite a significant drop in profits from its generic sales, the world’s largest player in the generics market, Teva Pharmaceutical Industries Ltd, does not believe that the apparent decline in the US generics market is likely to deepen.
This optimistic view is in contrast to the opinions expressed recently by two of Teva’s biggest rivals, Mylan NV and Perrigo Plc. It also appears to contradict Teva’s own experience over the last few months. Despite the fact that its generics business now accounts for less than half of its sales, the Israeli company saw its generics sales drop sharply by 17% in the first three months of 2016 – a fourth consecutive period of decline – and its first quarter profits fell by 12% from $1.36 to $1.20 per share.
But there is evidence to suggest that these poor results may have more to do with factors specific to Teva’s business than a decline in the generics market. The first quarter of 2016 saw the end of the patent on heartburn drug Nexium and asthma treatment Pulmicorto – high-selling Teva products – and a resulting drop in revenue from the US of around 32%, while an equity issue in December seems likely to have negatively affected the company’s share price.
The head of Teva’s generics medicines unit, Sigurdur Oli Olafsson, is skeptical about the warnings about a declining US market for generic: “We find the number of companies citing a tougher pricing environment or price deflation seems to have grown at an almost incredible rate. Teva has not seen any fundamental change or worsening in the pricing environment. What this boils down to is each individual company’s business model.”
Teva Shares On The Rise
This optimistic statement contributed to an immediate 3.7% rise in the price of Teva stock, the biggest in five months. These gains may also have been fueled by the announcement that the company expects to complete its $40.5 billion acquisition of Allergan Plc’s generics division by the beginning of July – a deal that will see Teva’s generics business account for almost two-thirds of its sales.
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