Industry Trend Analysis - Healthy Revenues For Teva But Prospect Of A Split Emerges - APR 2017

BMI View: Teva Pharmaceutical Industries has capped off a turbulent year with a marked increase in net revenues, driven by its acquisition of Actavis Generics. After a long period of near parity between the Generics and Specialty Medicines segments, sales of generics are once again Teva's dominant business by some margin. However, management changes suggest underlying issues, which has led to speculation of Teva splitting its business. As yet this remains speculation, but the growing gap between segment revenues raises possibilities.

Announcing its Q416 results, for the period ended December 31 2016, Dr Yitzhak Peterburg, Teva Pharmaceutical Industries' Interim President and CEO, commented that 2016 was a transformational year for the firm. Peterburg added that Teva was continuing to manage through a turbulent and evolving industry, but was committed to execute its strategy with more diversified revenue sources and profit streams, backed by strong product development in both generics and specialty medicines. For 2017, the company's main focus will be extracting synergies related to its acquisition of Actavis Generics, driving additional efficiencies throughout the organisation, supporting cash generation and paying down debt. Notably, Peterburg added that he is, with the entire Teva team, conducting a thorough review of the business to find additional opportunities to enhance value.

Teva reported net revenues worth USD6,492mn for Q416, at the top end of the USD6.2bn to USD6.5bn the firm had anticipated in Q316 that it would reach for Q416. This was an increase of 33.0% over the USD4,881mn reported a year earlier, and was up by a substantial 16.7% over the USD5,563mn reported for Q316. The rise in revenues was primarily the result of the inclusion of the results of the Actavis Generics business. However, Teva reported an operating loss in Q416 of USD137mn, compared to an operating income of USD931mn a year earlier and USD765mn in Q316. A net loss of USD974mn was also reported for Q416, compared to a net income of USD489mn in Q415 and USD410mn in Q316.

Revenues Leap But Income Falls
Teva's Quarterly Top-Line Results (USDmn)
Source: Teva Pharmaceutical Industries

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