Teva predicts bleak year ahead as generic, Copaxone sales drop
- Generic giant Teva expects business to deteriorate further this year, unveiling on Tuesday forecasts for 2019 that predict a sales decline of between 8% and 10% compared to 2018's total.
- Falling generic drug sales in North America and abroad have stung the Israeli drugmaker, as has the effects of copycat competition to its top-selling multiple sclerosis drug Copaxone. CEO Kåre Schultz, who was appointed in late 2017 to fix Teva's woes, has led a sweeping cost-cutting effort that's trimmed more than 10,000 jobs and reduced the company's expenses by more than $2 billion in 2018.
- Under Schultz, Teva has also begun to focus more on its pipeline of specialty drugs, including its recently approved medicines Austedo and Ajovy. But that reinvention remains a work in progress: sales of Austedo and Ajovy are forecast to grow by about $300 million this year, or roughly one-third of what Teva anticipates it will lose from generic erosion of Copaxone.
Teva's hoped-for turnaround has yet to emerge.
While analysts on Wall Street were not expecting growth to arrive this year, the company's guidance for the next 12 months look significantly bleaker than estimated. In response, Teva shares sank by 10% at market open on Wednesday.
In 2019, Teva forecasts revenues to total between $17 billion and $17.4 billion, which would represent a 9% drop at the midpoint from last year's total of $18.9 billion.
The company's troubles will remain much the same — generic competition to Copaxone (glatiramer acetate) is expected to steal away nearly $1 billion from 2018's sales figures, while slight declines look to be in store for the company's large generic business in North America.
"Looking ahead, we continue to expect that 2019 will be the trough for our business, a year in which we will experience similar challenges to those of 2018," said Teva's Schultz in a Feb. 13 statement.
Key to repairing Teva's fortunes will be ramping up sales of newly launched specialty drugs Ajovy (fremanezumab) and Austedo (deutetrabenazine). Combined, the two drugs brought in just over $200 million last year, and Teva hopes that figure will climb to around $500 million in 2019.
But Ajovy will face tough competition in its indication for preventive migraine. Eli Lilly's Emgality (galcanezumab) and Amgen and Novartis' Aimovig (erenumab) work similarly and are approved for the same patient population, making rapid sales gains for Ajovy a difficult prospect.
In generics, Teva has said its business will stabilize this year as it works to launch new copycat products. But there are some signs of trouble there, too. A recent report from Reuters noted Teva's launch of a generic EpiPen (epinephrine) has been slow, with supply limited.
Teva did guide conservatively last year, eventually beating its highest initial estimates for 2018 by $100 million. A similar dynamic could be in play in 2019, RBC Capital Markets analyst Randall Stanicky noted.
Even so, the financial constraints experienced recently by the company will persist — in part a consequence of a 2015 deal to buy Allergan's generics business for $40 billion. That deal has saddled Teva with debt, restricting its ability to look externally for opportunities as it works to reduce its leverage. Roughly $8.5 billion in debt will mature over the next three years.
A major restructuring is designed to address those limitations, with cuts of $2.2 billion in expenses last year and a goal of reducing the company's spending base by another $3 billion in 2019.
Teva's pitch is that, while 2019 may see business continue to worsen, the company is now positioned for a healthier financial future.
"Road to recovery was never going to be straight, narrow, and without obstacles, but big picture takeaway is that U.S. generics have stabilized and 2020 will still mark a return to growth," wrote Raymond James analyst Elliot Wilbur in a Feb. 13 investor note.
The concern, however, is that recovery remains ever around the corner.
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