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TEVA Beats on Q1 Earnings and Sales, Keeps View, Stock Down

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Teva Pharmaceutical Industries Limited (TEVA - Free Report) reported first-quarter 2021 earnings of 63 cents per share, which beat the Zacks Consensus Estimate of 58 cents. Earnings declined 17% year over year due to lower operating profit.

Revenues of the generic drugmaker came in at $3.98 billion, which also beat the consensus estimate of $3.96 billion. However, sales declined 9% on a reported basis (10% on constant currency terms) year over year with revenues declining in all the segments. Revenues were also affected by the impact of COVID-19 pandemic.

Segment Discussion

Teva reports through the following segments based on three regions — North America (United States and Canada), Europe and International Markets.

North America segment sales were $1.99 billion, down 5% year over year due to lower sales of Anda, branded drugs, Copaxone and Bendeka/Treanda, which offset higher sales of generic products and Austedo. The segment has seen lower demand for some products due to lower physician and hospital activity amid the pandemic. However, demand for some products in North America increased related to the treatment of COVID-19 symptoms.

In the United States, sales declined 4% to $1.85 billion.

Copaxone posted sales of $164 million in North America, down 17% year over year due to generic erosion.

Combined sales of Bendeka and Treanda declined 14% to $91 million due to competitive pressure. The launch of a competing bendamustine solution called Belrapzo by Eagle Pharmaceuticals (EGRX - Free Report) in June 2019 has been hurting sales of Bendeka/Treanda.

ProAir sales declined 9% to $54 million. Austedo, approved to treat chorea associated with Huntington’s disease and tardive dyskinesia, recorded sales of $146 million in the quarter in North America, up 20% year over year, driven by higher volumes.

Ajovy, Teva’s migraine treatment, recorded sales of $31 million in the quarter, up 8% year over year.

Generic products revenues rose 11% to $1.05 billion in the North America segment driven by higher revenues from new products like generic version of Gilead’s (GILD - Free Report) HIV drug, Truvada and higher sales of Truxima (Teva’s biosimilar to Roche’s [(RHHBY - Free Report) ] Rituxan) and ProAir authorized generic, which offset lower volume and pricing of other generic products.

Distribution revenues, generated by Anda, declined 32% in the quarter to $289 million due to lower demand amid the pandemic. Unfavorable comparison due to significant pandemic-related customer stocking in the first quarter of 2020 also hurt sales in the first quarter of 2021.

The Europe segment recorded revenues of $1.21 billion, down 13% year over year. In constant currency terms, sales declined 20% mainly due to unfavorable comparison to the year-ago quarter, which benefited from significant pandemic-related customer stocking. In addition, lower demand for generic, OTC and respiratory products and lower sales of cough and cold products due to the pandemic, lower sales of Copaxone and price declines of oncology drugs hurt the segment revenues. Sales in Europe are expected to improve from the second quarter as lockdowns are eased.

In the International Markets segment, sales declined 13% to $490 million. In constant currency terms, sales declined 7% due to lower sales in Japan. Sales declined in Japan due to regulatory price reductions, generic erosion of some products as well as divestment of the majority of assets of the Japanese business venture.

The Other segment (API manufacturing business and certain contract manufacturing services) recorded revenues of $178 million, flat year over year, both on a reported and constant currency terms.

Margins Rise

Adjusted gross margin rose 70 basis points (bps) to 53.8% in the quarter due to a favorable product mix and efforts to improve cost of goods sold. Adjusted research & development expenses rose 10.4% year over year to $244 million. Selling and marketing (S&M) expenditure declined 3.7% from the year-ago level to $549 million. General and administrative (G&A) expenses declined 4.1% to $278 million. Adjusted operating income declined 13% in the quarter to $1.08 billion due to lower profit in Europe.

2021 Guidance

Teva maintained its financial guidance for 2021. It expects revenues to be in the range of $16.4-$16.8 billion. The company expects 48% of 2021 sales to be generated in the first half of the year and approximately 52% in the second half

The earnings guidance was maintained in the range of $2.50-$2.70 per share.

Our Take

Teva’s first-quarter results were better-than-expected as it beat estimates for both earnings and sales. However, sales and profit declined year over year. Shares were down 2.4% on Wednesday. Teva’s share price has risen 4.9% this year so far compared with the industry’s increase of 4%.



Teva faces challenges in the form of generic erosion of Copaxone, new competition for branded products, pricing erosion in the U.S. generics business, a high debt load and a sparse branded pipeline. Nonetheless, its newest drugs, Austedo and Ajovy could emerge as significant drivers of long-term sales growth. With encouraging progress on restructuring activities, stabilization in the U.S. and European generics business through new generic launches and improvement in financials, we believe the company may return to growth in a couple of years. Though Q1 results were impacted by the pandemic, Teva expects the impact from COVID-19 to ease starting in the second quarter and return to a normalized level in second half.

Teva, however, is involved in an opioid litigation and faces DOJ investigations on allocations of price fixing, which are overhangs on its stock.

Currently, Teva has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Teva Pharmaceutical Industries Ltd. Price, Consensus and EPS Surprise

Teva Pharmaceutical Industries Ltd. Price, Consensus and EPS Surprise

Teva Pharmaceutical Industries Ltd. price-consensus-eps-surprise-chart | Teva Pharmaceutical Industries Ltd. Quote

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