Wednesday, February 14, 2007

Cholesterol drugs boost Teva profits


Teva Pharmaceutical Industries Ltd., the world's largest generic-drug maker, said fourth-quarter profit surged on US sales of cholesterol treatments. Shares rose the most in almost two years on the company's forecast.

Net income climbed 51 percent to $460 million, or 56 cents a share, from $305m., or 45 cents, in the year-earlier period, the Petah Tikva-based company said Tuesday. Revenue rose 63% to $2.3 billion.

Earnings soared on contributions from Ivax Corp., the respiratory-drug maker Teva acquired last year for $7.6b.

Teva also had exclusive US rights to sell generic versions of Pfizer Inc.'s Zoloft antidepressant, as well as Bristol-Myers Squibb Co.'s Pravachol and Merck & Co.'s Zocor cholesterol treatments. Teva's exclusivity has now expired on all three drugs, and earnings growth may slow, analysts said.

"Zoloft and Zocor were the biggest generic drugs, ever. They certainly had an impact," Chief Executive Officer Israel Makov, who will be succeeded by Shlomo Yanai next month, said at a press conference in Tel Aviv.

Teva sees 2007 revenue growing by less than 10% because of the loss of exclusivity, Makov said last quarter.

Still, the company on Tuesday forecast record sales this year of more than $9b., compared with $8.4b. in 2006. Fully diluted earnings will be between $2.07 to $2.19 a share. Revenue will probably break $10b. in 2008, with earnings of $2.50 a share, Makov said.

Shares of Teva jumped NIS 8.40, or 5.7%, to NIS 155.70 in Tel Aviv. It was the stock's biggest gain since February 2005. The company was expected to earn $481.6m., or 58 cents, the median estimate of six analysts surveyed by Bloomberg News.

Teva's gross profit margin suffered in the quarter because the company overstocked generic Zocor at the end of its exclusivity period, said Frances Cloud, who follows Teva at Nomura Code in London, in a telephone interview. Generic-drug makers have to make "educated guesses" about how much of a drug is needed at the end of an exclusive sales run, she said. "They got it wrong," Cloud said.

The US Food and Drug Administration awards 180-day exclusive sales rights to generic-drug companies who are the first to challenge patents on original products. Teva has 162 new drug applications at the FDA, 42 of which are potentially first-to-file. None has the sales potential of a Zocor or Zoloft copy, said Richard Gussow, who analyzes Teva at Excellence Nessuah in Tel Aviv, in a telephone interview.

"There aren't any big blockbusters coming up in 2007," he said, referring to drugs that have at least $1b. in sales.

Teva is eyeing a bid for German drugmaker Merck KGaA's generic unit, according to people familiar with the transaction. The unit might sell for about 4 billion euros, Cloud estimated. Teva said its forecast doesn't include any possible acquisitions.

The company plans to partly offset increased generic competition by launching at least one innovative medicine each year from 2009 to 2015, Makov said at a conference last September.

Teva's first proprietary drug, the Copaxone multiple sclerosis treatment, contributed $378m. to fourth-quarter revenue, an increase of 17%, the company said. Teva recently raised the price of Copaxone by 10%, Gussow said.

Azilect, Teva's proprietary treatment for Parkinson's disease, reached sales of $19m. according to the statement. Teva began selling Azilect in North America last year.

Expanded prescription-drug coverage under Medicare, US health insurance program for the elderly and disabled, is helping sales, executives told analysts on a conference call. The company expects "significant motion" on a proposal in the US Congress to permit the production of generic biological drugs, they said.