We understand that Teva Pharmaceutical Industries (TEVA) has had some challenges recently, which explains why it has declined from its 2010 peak of $64.95 per share. However, we find it absolutely ridiculous that Teva should be trading at an adjusted 2012 PE of ~7X earnings and a reported PE of 11X earnings. Teva is the industry leader in the generic drug segment. Teva has generated a higher net income in the last 12 months than its four biggest competitors (Perrigo, (PRGO), Forest Labs (FRX), Mylan (MYL) and Watson Pharmaceuticals (WPI)) put together and yet is trading at a PE ratio well below those companies, with the exception of Forest Laboratories.
On May 23rd, Teva’s new President and CEO Dr. Jeremy Levin held an investor call to issue TEVA’s updated outlook. Highlights from the call include the following key figures:
- Total net sales of approximately $20-$21 billion, consisting of total U.S. net sales of $10.5 billion, total European net sales of $5.8 billion, and total ROW net sales of $4.2 billion. This was down from $22 billion.
- Outlook was revised downward due to the negative effects of the Eurozone debt crisis. $600M was estimated due to negative currency impact from the weak Euro currency and $400M was estimated due to negative macroeconomic impacts.
- Outlook also revised downward due to efforts undertaken to reduce wholesaler inventory in the US market. This had a negative impact on TEVA’s outlook of $540 million, including $400 million in generic products.
- Adjusted non-GAAP EPS of $5.30-$5.40, down from $5.48-$5.68
- COPAXONE sales of $3.8 billion
- Net research and development expenses of about 7% of revenue, including cli
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