Capping a third quarter marked by investor worries on debt and opioid liabilities, Teva Pharmaceutical reported higher-than-expected cash flow, named a new CFO and said it will soon launch the first U.S. biosimilar of a blockbuster cancer drug.
The results sent Teva shares in an unfamiliar direction Thursday — opening 6% up at $8.57 and climbing to a gain of more than 10% by midday. The stock is still down more than 60% from a year ago, but Wall Street analysts voiced cautious optimism about the company's trajectory moving forward.
While sales slightly beat Wall Street's expectations, quarterly revenue was still down 6% from a year ago, and uncertainty still lingers over the company's debt and opioid lawsuits. Here are the five most significant developments, and what they mean for the underlying business.
1. The next CFO named
Michael McClellan's last day as chief financial officer is set for Friday, Nov. 8. Teva said earlier this year McClellan was leaving the company due to an illness in his family, with CEO Kåre Schultz taking over those financial duties in the interim.
The Israeli drugmaker announced a successor Thursday in Eli Kalif, previously a senior vice president of finance at Flex, a technology design and manufacturing service provider.
Kalif will begin on Dec. 22, working out of Teva's global headquarters in Israel. He will take over as the company is closing out a significant two-year restructuring program that aims to reduce base spending by $3 billion. Schultz said Thursday the company remains on track to hitting that goal.
2. First Rituxan biosimilar set to enter the U.S. market
Working with its Korean partner Celltrion, Teva will launch next week the first biosimilar of Rituxan in the U.S. The biologic copy is branded as Truxima and will carry a list price 10% lower than Roche's branded drug.
Truxima will initially carry Rituxan's oncology label as a treatment for non-Hodgkin's lymphoma and chronic lymphocytic leukemia. Teva said it expects to expand into Rituxan's other indications, including rheumatoid arthritis, in the second quarter of 2020 through a patent settlement with Roche.
The entry will further test Roche's ability to keep growing sales even as its top cancer drugs face market competition.
Rituxan and Herceptin have faced biosimilar competition in recent years in Europe and Japan, yet the Swiss pharma has kept pharma sales steadily growing with several successful new launches, including the multiple sclerosis drug Ocrevus.
3. Copaxone sales holding up better than expected
Generic competition has weighed on Teva's multiple sclerosis drug, Copaxone, but not as much as Wall Street has expected.
Raymond James analyst Elliot Wilbur called third quarter sales of $271 million "once again stronger than anticipated" and showing the drug's "resilience" in the face of generic competition.
That still represents a year-over-year decline of 41% for Teva's best-selling branded drug. Global Copaxone sales have fallen from $3.8 billion in 2017 to $2.4 billion in 2018, and have posted roughly $1.1 billion for the first nine months of 2019.
4. Ajovy disappoints, raising questions on future growth
Teva's migraine drug Ajovy has faced intense competition in the new but crowded therapeutic class of CGRP inhibitors. Rival treatments are marketed by partners Amgen and Novartis, as well as Eli Lilly.
Ajovy is a key future driver for Teva, but has largely disappointed in its first year. The drug brought in $25 million in third quarter sales, missing a Wall Street consensus of $34 million, Evercore ISI analyst Umer Raffat wrote Thursday.
Raffat called it Ajovy's most significant miss yet, but noted Teva executives forecast a recovery after a disappointing start. Teva is planning to launch an auto-injector version in the coming months, which could make it more competitive with the rival drugs, Raffat wrote.
5. Free cash flow levels rise
Teva posted $550 million in free cash flow for the third quarter, which surpasses the combined cash flow for the first half of 2019.
After disclosing $168 million in free cash flow last quarter, some Wall Street analysts raised alarm about the low figure and how it could impact the company's ability to repay its debt on time.
Even with an impressive quarter in cash flow, debt still remains an overhang. At the end of September, Teva has about $26.9 billion in debt.
And the $550 million figure is 20% lower than a year ago, when the company reported $704 million in quarterly free cash flow. Teva cited higher capital investments and lower revenues for the decline.