Teva Pharmaceutical Industries is scheduled to report third-quarter earnings on Thursday, and the struggling generic drugmaker’s recent opioid settlement is expected to take center stage.
J.P. Morgan analysts this week said that “opioids remain the key focus of the story” for Teva TEVA, -3.75%. In October, the Israeli drugmaker reached an opioid-related settlement with two Ohio countries. It will pay $20 million and provide the counties with a three-year supply of opioid dependency therapy Suboxone. It also said last month it has established a broader “global” agreement in principle with officials in four other states that would likely be a similar mix of cash payments and products as the Ohio settlement.
Teva’s shares jumped 10% on that news.
“Ultimately, while we are encouraged with Teva’s progress with the state [attorneys general] on a settlement, a global settlement with all parties is far from certain at this point and [we] see the ultimate cost of that settlement as a core driver of Teva shares from here,” J.P. Morgan analysts wrote in the note.
Along with Teva, a handful of drug distributors (AmerisourceBergen ABC, -1.18%, Cardinal Health CAH, -0.17% and McKesson MCK, -1.33% ) also settled opioid-related lawsuits in Ohio last month. The deal averted the first federal opioid trial. In addition, those companies, plus Johnson & Johnson JNJ, +0.69% and Mallinckrodt MNK, -6.46%, have settled with the same Ohio countries. (Last month, J&J had to lower its third-quarter earnings to account for opioid litigation.)
Mallinckrodt CEO Mark Trudeau told investors this week that while opioid-based products generate roughly one-third of the company’s business, he views the company’s portfolio as “heterogeneous.” “Our objective is to resolve these cases and come to some type of a global resolution so that we can eliminate the overhang that exists on the company,” he said.
Beyond legal issues related to opioids, Teva remains a company in transition. Sales are declining for its longtime top-selling brand, Copaxone, a multiple sclerosis treatment, after it lost patent protection. Turnaround specialist Kare Schultz took over as CEO two years ago after a string of changes in the top job. Then came thousands of layoffs and the arrival of a restructuring plan. However, the company has since had two treatments-to-watch approved by the U.S. Food and Drug Administration: preventative migraine treatment Ajovy a year ago and Huntington’s disease therapy Austedo in 2017.
Here’s what to watch in Teva’s earnings:
Earnings: The consensus estimate of analysts polled by FactSet is for earnings per share of 60 cents, down from 68 cents last year. Estimize, which crowdsources estimates from sell-side and buy-side analysts, hedge-fund managers, executives, academics and others, expects earnings per share of 63 cents.
Sales: Revenue is expected to hit $4.27 billion, according to FactSet. The Estimize revenue forecast is $4.28 billion. Those are both lower than the $4.53 billion reported in the third quarter a year ago.
Stock: Teva stock is up 14.31% for the last three months, but has fallen 48% this year, while the S&P 500 SPX, -0.16% has gained about 23%.
Other things to look for:
– Expect a continuing drop-off in North America sales for Copaxone. FactSet estimates put sales of the drug at $225 million for the quarter, compared with the $463 million reported for the like period a year ago.
– Other major generic drugmakers that reported earnings this week had mixed results in the third quarter. Mylan MYL, -3.34% beat profit estimates but said that a drop in gross margins in the U.S. is due to sales of the generic version of its longtime flagship product, the EpiPen. The CEO of Perrigo PRGO, -6.31%, which has said it plans to spin off its generics business, reported a 13% increase in generic drug sales in the third quarter.