Tag Archives: teva

Valeant Stock Sinks As 2016 Guidance Withdrawn, CEO Returns

Embattled specialty drug maker Valeant Pharmaceuticals ( VRX ) said Monday that it was withdrawing its financial guidance and will reschedule its Q4 earnings release, as CEO J. Michael Pearson returns after a long illness. Valeant stock was down 9% in morning trading in the stock market today , near 73 and near a three-year low of 69.33 touched in November. Valeant had planned to report its quarterly results Monday morning, though they would have been unaudited due to an ongoing review of the company’s finances following a scandal last fall that called into question Valeant’s accounting and its relationship with now-closed specialty pharmacy Philidor. Last Monday, the committee reviewing those issues announced an interim finding that $58 million in Philidor-related revenue should not have been booked in 2014, leading to a 10-cent reduction in EPS for that year. However, since some of that revenue was supposed to be booked later, it would add 9 cents to 2015 EPS. Valeant CEO Fought Pneumonia Pearson came down with severe pneumonia at Christmastime and had to be hospitalized for so long that Valeant appointed former CFO Howard Schiller to take over his job temporarily. Pearson had also been chairman, but when he returned to work Monday the company said it would separate the two roles and appointed five-year board member Robert Ingram as chairman. Valeant affirmed its 2016 guidance in mid-January, calling for a 21% increase in sales and a 31% hike in EPS. The fact that it’s now withdrawing that guidance is a worrisome sign, say analysts. “While we had expected updated guidance, we struggle to fully understand the rationale for removing guidance altogether,” wrote Nomura analyst Shibani Malhotra in a research note. But Malhotra says Pearson’s return is a positive sign. “We believe investors still view much of Valeant’s strategy and success as driven by Pearson, and we expect that the ability to retain him as a leader will allow the company to maintain one of its more significant competitive advantages,” she wrote. “Perhaps more importantly, we believe the fact that Pearson is returning as CEO bolsters the credibility of the company and the board of directors, given that the board publicly supported Pearson and his leadership throughout the recent public scrutiny.” RBC Capital Markets analyst Douglas Miehm agreed, noting that Pearson said he would try to build stronger relationships with payers and government regulators and would improve Valeant’s accounting and transparency. “Having said this, we see the overall approach to rescheduling Q4 and withdrawing guidance after reiterating it in January as likely to carry more weight until Mr. Pearson has been able to reach out to the Street and provide some clarity,” Miehm wrote in his research note. Valeant also revealed that Actavis, the generic drug maker in the process of being acquired by Teva Pharmaceutical Industries ( TEVA ), had filed for FDA approval of a generic version of Xifaxan 550mg, a gastrointestinal drug that was the main selling point of Valeant’s $11 billion acquisition of Salix Pharmaceuticals last year. “We note that Valeant currently has 22 patents covering Xifaxan 550, which are scheduled to expire between August 2019 and October 2029,” Miehm wrote. “We continue to believe a generic is unlikely for at least seven years.”

Allergan Q4 Earnings Beat, But M&A Dance Card Challenges Comps

Big Pharma player Allergan unveiled what it expects to be its final full year of operation as an independent drug maker before merging into Pfizer, reporting fourth-quarter 2015 earnings that beat expectations and revenue that barely topped Wall Street estimates. Before the market open, Allergan ( AGN ) said non-GAAP earnings rose 33% to $3.41 per share on a revenue gain of 74% to $4.2 billion. Both metrics exclude discontinuing operations, notably Allergan’s Global Generics business that it agreed to sell in July. The Global Generics unit carries the old Actavis name and generic drugs lines of business. Actavis had purchased specialty drug and Botox maker Allergan, a deal that closed in March, and renamed itself Allergan. Shares jumped 2.8% to 283.07  in early trading in the stock market today . Allergan had closed down 0.8% on Friday to 275.75, 18% off its all-time high of 340.34, touched July 29. Pfizer ( PFE ) was up  1.4% to 29.93  in early trading Monday, 17% below a nearly 12-year high set July 31 at 36.46. Analysts polled by Thomson Reuters expected Q4 EPS of $3.34 minus items, down 14.6% from $3.91 in 2014, on revenue of $4.192 billion, up 3.4% from Q4 2014’s $4.057 billion, although analyst numbers apparently were not uniformly adjusted for discontinuing operations. Allergan presented the pro forma year-earlier numbers as adjusted EPS of $2.57 and revenue of $2.4 billion. For the full year, Allergan said non-GAAP EPS from continuing operations increased 78% to $13.43 on revenue from continuing operations up 124% to $15.07 billion. With varying adjustments, for the full 2015 analysts expected $15.43 per share minus items, up 66% from $9.29 in 2014, on sales of $18.206 billion, up 117% from $8.380 billion in 2014. Allergan reported a Q4  GAAP loss from continuing operations of $2.13 per share, compared to a GAAP loss from continuing operations of $4.48 per share in the prior-year period. It said full GAAP results were impacted by amortization and acquisition expenses, license agreements, impairments, and severance related mainly to the acquisition of Allergan on March 17,  and Kythera on Oct. 1, as well as research and development expenses resulting from the purchase of R&D assets of Mimetogen. Allergan had declined to freshen its guidance upon issuing its Q3 performance Nov. 4, citing early merger discussions with Pfizer back then. But Monday it guided 2016 revenue to about $17 billion, with “no material changes to gross margins” from current levels and a non-GAAP tax rate “normalized” to about 14%. Management didn’t specify EPS for the year nor offer Q1 guidance other than suggesting Q1 performance would be the weakest of the year and fall below Q4 2015 results. Allergan’s 2015 results were an analyst’s challenge, influenced by its extraordinary M&A dance card. In Q3, it began discontinuing operations of the renamed Actavis generic lines, which it agreed to sell to Teva Pharmaceutical ( TEVA ) in July for $40 billion. By Nov. 23, Allergan’s board agreed to Pfizer’s offer of 11.3 Pfizer shares for each Allergan share, then valuing Allergan at $363.63 a share, or $160 billion for the entire deal, expected to take nine months to close. CEO Brent Saunders told analysts in a conference call following the Q4 earnings release that he still expects the Pfizer buyout to close in the second half of 2016. It would be the second-largest acquisition ever, after the sale of Vodafone AirTouch in 1999 to Mannesmann for $202 billion. Dell’s October offer to buy EMC ( EMC ) is valued at $67 billion. The Pfizer acquisition of Allergan is another in a thinning number of tax inversion deals that allow American companies to domicile in Ireland, Allergan’s home base, where the buyer may enjoy a lower tax base. The Obama administration has criticized the practice and thrown up speed bumps, if not road blocks. On Feb. 8,  Pfizer said it plans to reorganize its two broad lines of business into three  after the merger with Allergan is complete. Allergan CFO Tessa Hilado told analysts that debt stood at $42.7 billion on Dec. 31 and that $8 billion would be paid down after the close of the Teva sale. She put revenue from top-seller Botox at $656 million in Q4, with eye drug Restasis at $365 million, and Namenda XR at $190 million.  She said the CVS ( CVS ) purchase of Target ( TGT ) pharmacies “had an effect in Q4” on revenue, but that it didn’t and wouldn’t impact earnings.

Top 3 iShares ETFs Provide Exposure To The Health Care Sector

Summary The Top 3 iShares ETFs in our data base are EIS, IHI and EDEN. Large exposure to the health care area, in one form or another, is the common factor among the three ETFs. This sector has strong fundamentals driven by government mandated health reforms pushing managements to action. Introduction July was a choppy month in the markets, with Greece driving the headlines. The markets sold off during the Greek rebellion, rallied in relief when Greece agreed to tough bailout conditions, and sold off quickly heading into the Federal Reserve’s FOMC meeting. Then it bounced again, when the FOMC issued a dovish statement after its meeting. During this volatility, the three iShares ETFs that rose to the top of our medium-term rankings (see Figure 1) were the iShares MSCI Israel Capped ETF (NYSEARCA: EIS ), the iShares U.S. Medical Devices ETF (NYSEARCA: IHI ) the iShares MSCI Denmark Capped Investable Market Index ETF (BATS: EDEN ). The common factor uniting all three top iShares ETFs is the dominant exposure to the health care area in their portfolios. (click to enlarge) Figure 1: The best trending iShares ETFs from the ETFmeter.com database. (Chart courtesy ETFmeter.com ) The Common Factor EIS has approximately 26% of its assets in Teva Pharmaceuticals (NYSE: TEVA ). The world’s largest manufacturer of generic drugs this week announced it had purchased Allergan’s generic drug business. The deal just adds depth to its generics portfolio plus more growth opportunities, and pushed TEVA to a new high following its major breakout in early 2014. For EIS, its top 10 holdings account for nearly 70% of its assets, and add exposure to Israeli banks, industrials, telecom, and materials. The correlation between the performance of EIS and TEVA is a strong 79% (see Figure 2). (click to enlarge) Figure 2: Teva Pharmaceuticals is the largest holding of EIS, and the correlation between the two is 0.79 and rising (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) Medtronic, Abbot Labs and Thermo Fisher Scientific are the three top holdings of the iShares U.S. Medical Devices ETF, accounting for more than 30% of the ETFs assets. Almost 82% of the fund’s assets are in just 20 stocks. In our analysis, eight of the top 20 stocks are rising strongly. Its best performing stocks this month are Bard (NYSE: CR ) and Intuitive Surgical (NASDAQ: ISRG ). The long-term correlation between IHI and Medtronic (NYSE: MDT ), its largest holding, is 0.94 (see Figure 3). (click to enlarge) Figure 3: Medtronic is the largest holding of IHI, and the correlation between the two is 0.94 (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) The EDEN iShares Denmark ETF has broken out to new highs, and it has Novo Nordisk (NYSE: NVO ) to thank for it. A bit more than 22% of the ETF’s assets were in Novo Nordisk, with its top 10 holdings accounting for some 64% of the assets, scattered amongst the mega shippers and brewers. Novo Nordisk focuses on diabetes drugs and assorted pharmaceuticals. Lately, the 200-day correlation between EDEN and NVO is about 0.98, which means that the ups and downs of EDEN have closely followed the fortunes of NVO (see Figure 4). (click to enlarge) Figure 4: Novo Nordisk is the largest holding of EDEN, and the correlation between the two is 0.98 (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) Looking Ahead Health care stocks have been amongst the best performers for the past several years. Health care reform in the U.S. has pushed managements into action, and the fundamental drivers for the sector are likely to remain strong for the foreseeable future. Thus, these iShares ETFs are likely to have a wind in their sails far beyond the horizon. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.