Investors are not feeding on Teva’s trough year

If it was Teva’s intent to provide a pessimistic 2019 guidance with the hope of beating it the strategy has not pleased investors. Shares fell 7% in early trading today after the Israeli group said it expects revenue, profit and earnings per share to come in well below consensus. Teva's chief executive, Kåre Schultz, repeated warnings that 2019 will be a “trough year” for revenue as Copaxone and Proair continue to decline with generic competition, and new products like the migraine drug Ajovy yet to pick up the slack. Ajovy disappointed investors by selling $3m in the fourth quarter of 2018, below consensus of $6m. In an analyst call Mr Schultz also focused on a restructuring effort that has seen Teva cut $2.2bn from its 2017 spending base of $16.3bn, and that will see another $800m sliced off by the end of 2019. Teva executives said they expect to see an “inflection point” later this year where revenue declines begin to reverse, which would be in keeping with Ajovy sales guidance of $150m for 2019. The sellside currently predicts $97m this year, according to EvaluatePharma's consensus, making this look like an ambitious goal. Signs that Teva has bottomed out would be most welcome for investors who have watched the company struggle with loss of exclusivity for Copaxone, its big money spinner, and worldwide price pressure on generic drugs.

Teva vs the analysts
  Teva 2019 guidance Consensus
Revenue $17.0-17.4bn $18bn
Operating income $3.8-4.2bn $4.9bn
EPS $2.20-2.50 $2.81
Sources: Teva & EvaluatePharma.

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