A Sluggish End to the Year
Before delving into Teva's results, it is worth repeating that Wall Street is a game of relative performance; companies can report objectively good (if not great) results and nevertheless disappoint analysts and investors.
To that end, Teva's 16% revenue growth this quarter was not bad, even if it was about 5% shy of the consensus estimate. While the company's biggest drug, Copaxone for multiple sclerosis (MS), did well with 26% sales growth (more than one-fifth of the company's sales), North American generic sales declined 5%. That is a bit puzzling, particularly given the company's exclusivity on generic Effexor XR. Then again, with doctor visits down across the board in the U.S., maybe that is where the answer lies. (For more, see There's Nothing Generic About The Profits.)
Profitability was not too problematic this period. Gross margin improved by both GAAP and non-GAAP calculations, and the company's non-GAAP operating income grew about 23% for the quarter. All in all, the company missed the average analyst guess by about three cents, though a better-than-expected tax rate helped. (For more, see Zooming In On Operating Income.)
The Road Ahead
Perhaps it has been going on a bit too long now to still be ironic, but one of the major concerns surrounding Teva involves competition in its branded drug business. Novartis (NYSE: NVS) will likely take some business away from Teva with its new oral MS drug Gilenya, and Genzyme (Nasdaq:GENZ) likewise has big hopes and expectations for its entry into the market.
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