Teva CFO Dan Suesskind: We're OK
Avishai Ovadya
13.12.2001 11:34
Despite the weakness in its share, Teva (Nasdaq: TEVA) has been trying to project a business as usual attitude. "We're comfortable with the analysts' fourth quarter 2001 and 2002 forecasts," claims Teva CFO Dan Suesskind, allaying investors' concerns.
In other words, Teva will post a fourth quarter profit of at least $85 million ($0.61 profit per share) on revenue of at least $540 million, compared with third quarter profits of $79.4 million ($0.58 per share) on revenue of $506 million.
"Teva and analysts aren't disappointed by the flow of generic approvals," adds Suesskind. "The question is one of expectations. The fourth quarter is proceeding as we had expected. The US Food and Drug Administration (FDA) has already given us one generic approval in the fourth quarter. We thought we might get [FDA] approval for a generic drug for diabetes. It hasn't come through yet, but it will soon. The ethical company has conducted clinical trials of the drug on children, so their patent was extended by three months."
"The clinical trials revealed side-effects. They added another drug to the formula, and claim that generic drug companies cannot market the drug. They're demanding a three-year extension [of their patent]. Everyone started clamoring against them, and it was decided to amend legislation to close the loophole. The legislation has been fully approved (by Congress), and is now waiting for the [US] president's signature."
"When that happens, Teva will immediately receive [FDA] approval. That may yet happen in the present quarter. However, Teva will not undergo any fundamental changes. Although the market is large - it's estimated at $1.7 billion - many generic drug companies are planning to launch generic drugs and the price will fall substantially."
Suesskind is optimistic about the years ahead. "Nothing has altered our positive business trends. We have many quite valuable applications in the pipeline. [FDA] approvals will be granted over a period of several years, guaranteeing us future growth. It's simply untrue to claim that there's a problem with FDA approvals."
All knowledgeable analysts agree Teva's future is assured. The company has over 50 generic drugs waiting for FDA approval, worth over $20 billion. "Teva's generic drug business is better than ever," stresses Investec banking analyst Koby Finkelstein. Nessuah Zannex analyst Haim Israel is also full of praise. "I think the negative sentiment about the share is unjustified," he says.
Israel says, "Now more than ever, Teva is a buy opportunity. None of the elements causing the negative sentiment is justified. The announcement by generic drug manufacturer Watson Pharmaceuticals (NYSE: WPI) two weeks ago about problems in the generic drug market is incorrect. The real problem is at Watson, not in the market. Another element, the cancelled acquisition of FH Faulding and Co. (ASX: FHF), was surprising. The market was waiting for the deal. But when it turned out that the deal was not a good one for Teva, the market accepted that. In fact, Teva's management should be praised for not agreeing [to the deal] at any price. We would have seen problems in a couple of years, and then we would have asked why Teva bought Faulding. Another factor was oral Copaxone, whose interim results have been disappointing. In the best case scenario, the drug will be marketed in 2003. The delay is inconsequential. Teva's price does not yet reflect the potential of oral Copaxone, which can only be a pleasant surprise."
That might be true, but Teva's share has been depressed for months. Suesskind says, "It's hard to know what a share will do. I have no explanations, but I certainly think the key factor behind the share's behavior was the third quarter results. We didn't meet revenue forecasts in the preceding quarter, despite our surprising profits. It seems rather odd that the two factors didn't cancel each other out, because, ultimately, the most important element is profits."
"There may be some link with the high-tech situation. Disappointing sales by high-tech companies are indications of future profits. People apparently thought Teva's disappointing sales were an indication of its future profits. Another reason seems to be that good developments are easily understood, but bad news has a greater influence."
"Globes": Maybe investors are concerned that the final results of the oral Copaxone clinical trials in three weeks will be disappointing, and your strategic partner, H. Lundbeck A/S, will decide to halt further development, now that it is clear there will be at least a two-year delay in the drug's launch.
Suesskind: "I don't think anything new has happened. The interim results were delivered three months ago, and we're waiting for the final results. As for the participation or non-participation of Lundbeck, I believe we will all reach a positive conclusion and continue the trials."
"In any event, if you examine the share price, you'll see that we quickly returned to the situation that was in place prior to the announcement about the interim results of the clinical trial. In other words, the market understood. After all, the market doesn't think oral Copaxone is very important, because it is not included in our future figures."
Were there any repercussions from the cancelled acquisition of Faulding's injectable business?
"We were praised for knowing when to withdraw from an almost-completed deal."
You decided to market Copaxone in Europe in the fourth quarter. How is the launch going?
"It's going according to plan. We haven't yet launched it in many places in Europe. We received approval in principle to market Copaxone there, and before the middle of next year, we will have launched Copaxone everywhere. We started in Germany, which we considered to be very important, and we're satisfied by the results."
Numbers?
"It's hard to say, based on one month's sales in Germany. It should be remembered that we were in Germany earlier, but only marketed on an individual basis, without advertising. Now that we've received marketing approval, we're advertising extensively, and we expect results."
How are Copaxone sales in North America?
"They meet our forecasts. We're pleased by the progress of Copaxone sales there."
In the third quarter, you received [FDA] approval to market Nabumetone for treating arthritis. Analysts estimate the drug contributed $25 million to third quarter sales, and could contribute $40 million in the fourth quarter.
"I cannot comment on third and fourth quarter drug sales. Sales of the ethical product totaled over $250 million. Teva could get 70-80% of the market, and if we take falling prices into account, we could reach annual sales of $130 million, i.e. $65 million per six months. This does not mean we'll achieve that. It's a gradual process."
Published by Israel's Business Arena on 13 December 2001 |
