Teva’s 2017 revenue, profit forecasts miss

Teva Pharmaceutical Industries Ltd., the world’s biggest generic drug maker, forecast 2017 revenue and profit below estimates, citing delays in generic product launches.

US-listed shares of the Petah Tikva-based company fell as much as 6.7% to $35.41 on Friday.

Teva, which bought Allergan Plc’s Actavis generics business for $40.5 billion last year, said it expects to see mid-to-single digit percentage price erosion in its US generics business this year.

Teva, along with many of its peers, is under investigation for price-fixing of generic drugs in the United States.

Shares of rival generic drugmakers, including Mylan NV and Endo International Plc, also fell on Teva’s forecast.

Teva’s 2017 projection includes a conservative expectation of $750 million in sales from US product launches, CEO Erez Vigodman said on a conference call.

The outlook for its generic business was materially lower and “we’re not clear it’s conservative,” RBC Capital Markets analyst Randall Stanicky said.

On Friday, the company said it was reducing its dependency on big launches.

Teva also said it does not expect the 40 milligram dose of its flagship multiple sclerosis drug, Copaxone, to face generic competition in the United States this year.

Under that assumption, it expects the drug to generate US sales of $3.8b.-$3.9b. in 2017.

However, the entry of two generic competitors in February could cut revenues by $1b.-$1.2b., and hurt adjusted profit by 65 cents-80 cents, it said.

What stands out about the guidance is a degradation in gross margins, while still assuming a very healthy 2017 contribution from Copaxone, Leerink Partners’ Jason Gerberry said.

Teva also blamed launch delays in the second half of last year when it trimmed its 2016 forecast in November.

The following month it agreed to pay more than $519m. to settle US criminal and civil allegations that the company bribed overseas officials.

“2016 was a transition year for Teva. The entire healthcare sector has faced significant headwinds, and we have not been immune,” Vigodman said.

Teva expects earnings per share of $4.90-$5.30 on revenue of $23.8b.-$24.5b. in 2017, including a hit of $800m. from foreign exchange losses.

Analysts on average were expecting a profit of $5.41 per share on revenue of $24.82b., according to Thomson Reuters I/B/E/S.

This is another negative data point for the sector, RBC’s Stanicky said. “But it could have been worse.”