Teva Pharmaceutical (TEVA) Q1 Earnings: What's In The Cards?

Teva Pharmaceutical Industries Ltd. (NYSE:TEVA) is scheduled to report first-quarter 2017 earnings on May 11, before the market opens. Last quarter, the company delivered a positive earnings surprise of 3.03%.

This generic drug maker’s shares have lost 14.1% so far this year compared with the Zacks classified Generic Drugs industry’s decline of 2.1%.

Teva’s earnings have surpassed expectations in three of the last four quarters and met the same in the remaining one, delivering an average positive surprise of 3.35%.

Let’s see how things are shaping up for this announcement.

Factors to Consider

We believe that the inclusion of sales from Actavis (NYSE:AGN) Generics acquisition should continue to pull up Teva’s sales.

However, Teva’s generic segment could continue seeing weakness. The segment will remain under pressure due to pricing erosion as well as the absence of important product launches.

Meanwhile, in the branded segment, sales of blockbuster multiple sclerosis (MS) treatment Copaxone should continue to erode due to increased competition. Glatopa, a generic version of Copaxone 20 mg, entered the market in Jun 2015. Teva is also facing patent challenges for the 40 mg thrice-weekly formulation of Copaxone. Companies like Mylan N.V. (NASDAQ:MYL) and Momenta are looking to get approval for their generic versions of the 40-mg thrice-weekly formulation of Copaxone. Teva suffered a major setback in Jan 2017 with the U.S. District Court for the District of Delaware invalidating four out of five Orange Book patents for Copaxone 40 mg. Teva intends to appeal against the decision. There is uncertainty regarding the timing of the generic launch of Copaxone 40mg. It is possible that certain competitors may receive FDA approval and launch before the appeal decision is out.

Meanwhile, Azilect revenues should decline this quarter as a generic version of Azilect was launched in the U.S. in January this year.

Teva continues to focus on its cost reduction program, which should give its profits a boost.

In April, Teva announced FDA approval of SD-809 for the treatment of chorea associated with Huntington disease (HD). The tablets will be marketed by the trade name of Austedo. We expect management to update on the commercialization plans for the new drug at the conference call.

At the fourth-quarter conference call, Peterburg had said that a thorough review of the business is being conducted. Teva has also begun a comprehensive search for a new CEO with significant pharmaceutical experience. We expect an update on the CEO search at the conference call.

Earnings Whispers

Our proven model does not conclusively show that Teva is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP is -4.85% as the Most Accurate estimate stands at 98 cents while the Zacks Consensus Estimate is pegged higher at $1.03 per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Teva’s Zacks Rank #3 increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.

Sell-rated stocks (Zacks Rank #4 or 5), on the other hand, should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks in the healthcare sector that have both a positive Earnings ESP and a favorable Zacks Rank are:

Expected to release results on May 15, Editas Medicine, Inc. (NASDAQ:EDIT) has an Earnings ESP of 32.26% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Ionis Pharmaceuticals, Inc. (NASDAQ:IONS) has an Earnings ESP of +250.0% and a Zacks Rank #3. The company is scheduled to release results on May 9.

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