Why Teva Pharmaceutical Is Crashing Today — The Motley Fool

What occurred

After the corporate supplied buyers with one more disappointing replace to its monetary efficiency, shares in Teva Pharmaceutical (NYSE:TEVA) are dropping 15% as of 1 p.m. EDT.

So what

It’s been robust moving into 2017 for the world’s greatest generic drugmaker, and sadly, buyers hoping that the worst was behind the corporate earlier this yr might need to settle in and count on some extra rockiness.

A man using a laptop computer with smoke coming out of his ears.

IMAGE SOURCE: GETTY IMAGES.

Teva Pharmaceutical’s third-quarter efficiency continued to be hamstrung by ongoing generic drug pricing weak spot. The firm’s additionally seeing gross sales in its specialty prescribed drugs unit slip as demand for its multibillion-dollar a number of sclerosis drug, Copaxone, shifts to biosimilar options. 

Overall, Teva Pharmaceutical’s third-quarter gross sales fell 1% to $5.6 billion when in comparison with the identical time final yr. As a consequence, non-GAAP (typically accepted accounting ideas) revenue tumbled 23.7% to $1 per share within the interval. Generic medication gross sales slipped 7.7% to $three billion, and a 7% drop in Copaxone gross sales resulted in specialty medication gross sales slipping zero.7% to $2 billion.

Now what

Fellow Motley Fool Sean Williams did a pleasant job outlining the bull thesis for Teva Pharmaceutical not too long ago, and definitely, long-term buyers needs to be inspired by Teva Pharmaceutical’s bargain-basement valuation and long-term tailwinds related to a much bigger and older international inhabitants.

In the intermediate time period, nevertheless, the corporate’s nonetheless obtained loads of obstacles to beat. It minimize its dividend by 75% after the second quarter to unlock money to pay down debt. It additionally offered some belongings for practically $2.5 billion. Yet, debt stays north of $35 billion, and consequently, its monetary bills, together with curiosity expense, overseas alternate losses, and derivatives losses, have been $259 million within the quarter, up from $150 million one yr in the past.

Cash circulation remains to be optimistic, however buyers might want to carefully watch to see what occurs within the coming quarters following the FDA approval of Mylan’s (NASDAQ:MYL) 40 mg Copaxone in October. A 20 mg Copaxone has been out there for some time, however Teva’s been in a position to preserve Copaxone market share by shifting sufferers to its longer-lasting 40 mg model. That might change now that there is a 40 mg different. 

As for steering, Teva Pharmaceutical seems to be baking within the 40 mg Copaxone danger. It’s taken its income outlook all the way down to no less than $22.2 billion from no less than $22.eight billion and its non-GAAP earnings-per-share (EPS) forecast all the way down to no less than $three.77 from its prior outlook for no less than $four.30 per share. 

 

Todd Campbell owns shares of Mylan. His purchasers might have positions within the corporations talked about. The Motley Fool recommends Mylan. The Motley Fool has a disclosure coverage.


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