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What's in the Cards for Teva (TEVA) This Earnings Season?

Zacks Equity Research

Teva Pharmaceutical Industries Limited TEVA is slated to report third-quarter 2019 results on Nov 7, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 3.45%.

Teva’s earnings surpassed expectations in three of the last four reported quarters, with the average positive surprise being 6.30%.

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

This generic drugmaker’s shares have declined 45.9% this year so far compared with the industry’s decline of 0.6%.

 

 

Factors to Consider

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

In the third quarter, sales are expected to have been hurt once again by rapid erosion in sales of Copaxone, lower sales of other branded drugs, Bendeka/Treanda and ProAir, pricing erosion in the U.S. generics business and negative currency impact due to the strengthening of the dollar.

Among its newer drugs, Ajovy sales were soft in the second quarter. Back then, Teva had said that there was a decline in new prescription share of Ajovy, which management said was due to preference of patients for auto injectors while Ajovy is available as a subcutaneous injection. An update on the market share of Ajovy is expected on the third-quarter conference call. Ajovy was approved in Europe in April this year and Teva launched it in some European countries, which is likely to have added to Ajovy's third-quarter sales.

On the call, investors will also be interested to know how management plans to capture market share for Ajovy against Amgen AMGN and Lilly’s LLY CGRPs, which were also launched last year.

Meanwhile, sales of the other new product Austedo are likely to have increased in the third quarter.

Teva’s new generic product launches are likely to have boosted sales of its Generics unit, making up for price erosion in the U.S business. However, Teva saw stabilization of U.S. generics business in the first half, helped by ongoing launches, portfolio optimization and strong key products. An update is expected on the call.

Meanwhile, in Europe as well as International Markets segments, generic product launches offset lost revenues from the termination of partnership with P&G in Europe and lower sales in Japan in International Markets. It remains to be seen if this trend is reflected in third quarter-quarter results.

R&D costs could be lower due to pipeline optimization and resultant workforce reductions. Also, cost cutting and re-structuring activities are likely to have resulted in lower selling and marketing expenditure.

Key Recent Development

Last month, Teva announced a settlement with two counties of Ohio, Cuyahoga and Summit, in connection with the federal multidistrict litigation related to abuse of opioid-based drugs.  This resolved the counties’ opioid claims and removed Teva from the Track 1 opioid litigation. Per the settlement terms, Teva will make a cash payment of $20 million to be paid over three years. In addition, it will donate opioid treatment medication buprenorphine naloxone, a generic version of Suboxone, to the two counties worth $25 million, also over a period of three years 

Teva also entered into a proposed settlement with attorneys general of the four states (North Carolina, Pennsylvania, Tennessee, and Texas). Per the settlement, it will supply $23 billion worth of generic Suboxone and pay $250 million in cash over 10 years.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for Teva this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here.

Earnings ESP: Its Earnings ESP is -1.17% as the Zacks Consensus Estimate of 60 cents is higher than the Most Accurate Estimate of 59 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Teva carries a Zacks Rank #2.

Stock to Consider

Here is a healthcare stock that has the right mix of elements to beat estimates this time around.

Jazz Pharmaceuticals JAZZ has an Earnings ESP of +1.70% and is Zacks #2 Ranked. The company is scheduled to release results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

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