IHS Global Insight Perspective | |
Significance | Generic giant Teva (Israel)'s sales grew year-on-year (y/y) by 16% over the first quarter of 2010. Meanwhile, operating and net profits increased by 58% and 31% y/y respectively over the same period. |
Implications | The Israeli firm's topline growth continues to be led geographically by sales in North America, and in terms of product by Copaxone (glatiramer acetate). In addition to this, the indicated quarter has benefited from the weakening U.S. dollar compared with other currencies. |
Outlook | Teva has started 2010 on a good note, re-affirming its topline and research and development guidance for the year. This quarter has been eventful for the firm due to the acquisition of Ratiopharm (Germany), although the latter is still to have an impact on Teva's books given that the acquisition is yet to be approved by the relevant regulators. |
Teva's Q1 Results
Generic giant Teva has announced results for the first quarter of 2010, with net sales increasing year-on-year (y/y) by 16% to US$3.6 billion. Cost of sales and selling and marketing expenses over the same period grew y/y by 4% and 25% respectively; general and administrative expenses fell by 7.2% y/y during the three months in question. Topline has benefited due to the decline in the value of the U.S. dollar in relation to other currencies, and this has contributed US$98 million to first-quarter sales.
Teva Pharmaceutical Industries: Financial Results, Q1 2010 (US$ mil.) | ||
Q1 | % Change Y/Y | |
Net sales | 3,653 | 16.1 |
Cost of sales | 1,640 | 4.1 |
Selling and marketing expenses | 752 | 24.5 |
General and administrative expenses | 182 | -7.2 |
R&D (incl. acquired in-process R&D) | 211 | -3.7 |
R&D as a % of sales | 5.8 | 1.1pp lower |
Operating income* | 872 | 58.0 |
Operating margin | 23.9 | 6.4pp lower |
Net income | 714 | 58.3 |
Non-GAAP net income (after acquisition-based reconciliations) | 830 | 31.0 |
*Operating profit calculated by IHS Global Insight as: group sales minus cost of sales, SG&A costs, and R&D expenditure. | ||
Geographically, Teva's presence in North America, Europe, and in the rest of the world contributed 63%, 22%, and 15% to net sales over the three months ending 31 March 2010 respectively. New product launches over the quarter, such as generic Mirapex (pramipexole) and the continued sales of generic Adderall XR (mixed amphetamine), Pulmicort Respules (budesonide), Accutane (isotretinoin) and Eloxatin (oxaliplatin) have been key contributors to North American sales growth of 20% y/y. European sales have benefited from the increased sales of Copaxone (glatiramer acetate) and Azilect (rasagaline) in Italy, Portugal, and Poland, while strong sales in Russia and domestic market have contributed to international sales growth over the first quarter of 2010.
Product-wise, Copaxone remains Teva's biggest revenue generator accruing US$796 million over the indicated period. As usual Copaxone revenues in the United States accounted for the majority of the drugs revenues at 64.4% of global sales. On the contrary, the growth of sales outside the United States contributed to Azilect's sales growing by 40% y/y to US$77 million. Teva's global respiratory portfolio sales totalled US$193 million, up by 4% y/y over the quarter due to Qvar (beclometasone dipropionate) and Proair HFA (albuterol sulphate inhalation aerosol). On the downside, the firm's women's health business declined by 18.5% y/y to US$79 million over the indicated period due to weak sales of Plan B (levonorgestrel) one-step.
Teva: Pharmaceutical Sales by Region, (US$ mil.) | ||||
Q1 2010 | Q1 2009 | % Change Y/Y | % of Total Sales | |
North America | 2,309 | 1,925 | 20 | 63 |
Europe* | 812 | 739 | 10 | 22 |
Rest of the World | 532 | 483 | 10 | 15 |
Total Sales | 3,653 | 3,147 | 16 | 100 |
*Includes Switzerland and Norway | ||||
Over the first quarter, Teva's operating profit grew by 58% y/y to US$872 million, while net profits increased by 31% y/y to US$830 million.
Outlook and Implications
Teva has so far got off to a good start this year, with the firm beating its pre-set guidance of 15% y/y growth. While its research and development (R&D) expenses are currently short of the guidance, the firm has re-affirmed its goal of spending 6–6.5% of sales on R&D over the year.
Teva's launch of generic versions of Cozaar (losartan) and Hyzaar (hydrochlorothiazide; losartan potassium) with exclusivities on the former, as well as the 25-mg/100-mg and 12.5-mg/5-mg dosage forms of the latter, set to boost revenues in the North American market over the second quarter of the year. The increased access to Azilect, particularly in Asia owing to a pact with Lundbeck (Denmark), is expected to boost Asia-Pacific revenues over the forthcoming quarter of the year.
The quarter has been an eventful one after Teva successfully its fourth big-ticket acquisition, of generic competitor Ratiopharm (Germany). While acquisition-related costs are likely to continue to be a feature in Teva's books and could affect bottomlines in forthcoming quarters—the acquisition is yet to be approved by competition commissions in key markets—Ratiopharm is set to be Teva's ticket to consolidation of its European operations in the years to come.