- Teva on Thursday reported first quarter sales fell 19% versus the same period in 2018, as its top-seller Copaxone suffers from generic challenges and the company's own copycat business faces continued pricing pressure.
- New drugs Ajovy and Austedo are beginning to grow, but are not close to being big enough products to offset those losses. In the meantime, Teva is in the process of a push to cut $3 billion a year in costs, which has resulted in controversial plant closures and layoffs in Israel. Nonetheless, Teva reported a net loss in the quarter thanks to the negative effects of currency fluctuations.
- Executives have said they believe sales will resume growth in 2020. Their outlook for 2019 has remained unchanged, with sales forecast to reach between $17 billion to $17.4 billion — an expected drop of at least 8%.
Teva continues to struggle in its generics trap.
Its biggest product, multiple sclerosis injection Copaxone (glatiramer acetate), has been hit by competition from copycats, while its own generics business has been hit hard by pricing pressure.
Saddled with more than $28 billion in debt — some of it arising from the $40.5 billion purchase of the Allergan generics business — weakening revenue puts Teva in a bind. When Kåre Schultz took the helm in 2017, a massive cost-cutting effort followed to help improve the earnings picture.
With Thursday's first-quarter earnings release, Teva also reported that it has achieved $2.5 billion of the $3 billion in baseline annual cost reductions promised by Schultz, an effort due to be completed by year's end.
In a May 2 note to clients, Credit Suisse analyst Vamil Divan commended the progress toward the $3 billion goal, saying today's announcement suggested the cost-cutting has not lost momentum.
Cowen analyst Ken Cacciatore was less sanguine, however. "Cash generation remains problematic and at this debt level we need better cash yield. This means spending reductions — which have been sizeable — will need to go even further," he wrote in a note to clients.
Mature flagship products all took a tumble. Most importantly, North American quarterly sales for Copaxone shrunk 56% to $208 million over year-prior figures, and the North American generics business fell 11% to $966 million thanks to ongoing price pressure on all drugs.
The picture wasn't as bad in Europe, with Copaxone down 26% to $114 million and generics down 8% to $919 million.
The migraine injection Ajovy (fremanezumab) and Austedo (deutetrabenazine), a treatment for movement disorders, are expected to begin offsetting the losses from the older products, although with quarterly revenues of $20 million and $74 million respectively, they are not there yet.
Ajovy is up against tough competition from Amgen's Aimovig (erenumab) and Eli Lilly's Emgality (galcenezumab), so achieving big numbers will be a challenge.
Greater-than-expected revenue from those two new products is forecast to help Teva return to growth next year. If they stumble, Cowen's Cacciatore may be right in saying $3 billion in cuts is not enough.